Sumitomo Mitsui Financial Group Inc Annual Report 2008

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FY2008 Annual Report · Sumitomo Mitsui Financial Group Inc

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ANNUAL REPORT

2008

YEAR ENDED MARCH 31, 2008

www.smfg.co.jp/english

A
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A
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Printed in Japan

Aiming to become a globally competitive financial

services group with the highest trust

We are a group of highly qualified professionals

that can provide truly valuable financial services to our customers.

Each of us thinks and acts with pride as experts in each business area

in order to LEAD the competition in creating and delivering

customer VALUE in a continually changing business environment.

CONTENTS

● Message from the Management ...............................

● Outline of “LEAD THE VALUE” Plan

—SMFG’s Medium-Term Management Plan ............... 10

● Business Overview................................................................ 12

Consumer Banking...................................................................

Corporate Banking ...................................................................

Services for High-Net-Worth Individuals,
Business Owners and Employees............................................

Investment Banking..................................................................

International Banking................................................................

Treasury Markets ......................................................................

● Group Companies..................................................... 20

● Financial Highlights................................................... 22

● Financial Review ....................................................... 26

● Risk Management ..................................................... 36

● Corporate Social Responsibility (CSR) ..................... 52

● Initiatives for Enhancing Customer Satisfaction (CS)

and Quality................................................................ 53

● Corporate Governance ............................................. 54

● Internal Audit System ................................................ 55

● Compliance............................................................... 56

● Environmental Preservation Initiatives....................... 58

● Social Contribution Activities .................................... 62

● Human Resources .................................................... 66

● Financial Section and Corporate Data...................... 69

Financial Section ......................................................................

Corporate Data......................................................................... 199

This material contains certain forward-looking statements. Such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and actual results may materially differ from those contained in the
forward-looking statements as a result of various factors. Important factors that
might cause such a material difference include, but are not limited to, those
economic conditions referred to in this material as assumptions.

In addition, the following items are among the factors that could cause actual
results to differ materially from the forward-looking statements in this material:
business conditions in the banking industry, the regulatory environment, new
legislation, competition with other financial services companies, changing tech-
nology and evolving banking industry standards and similar matters.

Sumitomo Mitsui Financial Group, Inc.
Public Relations Department

1-2, Yurakucho 1-chome, Chiyoda-ku,
Tokyo 100-0006, Japan
TEL: +81-3-5512-3411

Sumitomo Mitsui Banking Corporation
Public Relations Department

1-2, Yurakucho 1-chome, Chiyoda-ku,
Tokyo 100-0006, Japan
TEL: +81-3-3501-1111

September 2008

SMFG 2008 1

These activities are supported by our three core strengths:

Spirit of Innovation

We LEAD the market by
providing innovative,
globally competitive services
that meet customer needs.

Solution &
Execution

We LEAD the business by using all
the knowledge and experiences of
our group to solve the issues of our
customers, whether individuals or
corporates, identified through a deep

understanding of their needs

and f i n a n c i a l
situations

Speed

We LEAD the pace by
providing our customers
with desirable services in a
timely manner with speed
and determination.

We create new VALUE by forming teams of

specialists in various fields and providing optimal services to

our customers through two-way communication.

As a result, we will be selected as a truly trusted partner.

Aiming to become a globally competitive financial

services group with the highest trust

We are a group of highly qualified professionals

that can provide truly valuable financial services to our customers.

Each of us thinks and acts with pride as experts in each business area

in order to LEAD the competition in creating and delivering

customer VALUE in a continually changing business environment.

CONTENTS

● Message from the Management ...............................

● Outline of “LEAD THE VALUE” Plan

—SMFG’s Medium-Term Management Plan ............... 10

● Business Overview................................................................ 12

Consumer Banking...................................................................

Corporate Banking ...................................................................

Services for High-Net-Worth Individuals,
Business Owners and Employees............................................

Investment Banking..................................................................

International Banking................................................................

Treasury Markets ......................................................................

● Group Companies..................................................... 20

● Financial Highlights................................................... 22

● Financial Review ....................................................... 26

● Risk Management ..................................................... 36

● Corporate Social Responsibility (CSR) ..................... 52

● Initiatives for Enhancing Customer Satisfaction (CS)

and Quality................................................................ 53

● Corporate Governance ............................................. 54

● Internal Audit System ................................................ 55

● Compliance............................................................... 56

● Environmental Preservation Initiatives....................... 58

● Social Contribution Activities .................................... 62

● Human Resources .................................................... 66

● Financial Section and Corporate Data...................... 69

Financial Section ......................................................................

Corporate Data......................................................................... 199

Sumitomo Mitsui Financial Group, Inc.
Public Relations Department

1-2, Yurakucho 1-chome, Chiyoda-ku,
Tokyo 100-0006, Japan
TEL: +81-3-5512-3411

Sumitomo Mitsui Banking Corporation
Public Relations Department

1-2, Yurakucho 1-chome, Chiyoda-ku,
Tokyo 100-0006, Japan
TEL: +81-3-3501-1111

September 2008

SMFG 2008 1

These activities are supported by our three core strengths:

Spirit of Innovation

We LEAD the market by
providing innovative,
globally competitive services
that meet customer needs.

Solution &
Execution

We LEAD the business by using all
the knowledge and experiences of
our group to solve the issues of our
customers, whether individuals or
corporates, identified through a deep

understanding of their needs

and f i n a n c i a l
situations

Speed

We LEAD the pace by
providing our customers
with desirable services in a
timely manner with speed
and determination.

We create new VALUE by forming teams of

specialists in various fields and providing optimal services to

our customers through two-way communication.

As a result, we will be selected as a truly trusted partner.

Message from the Management

We would like to thank you for your continuing support and patronage of Sumitomo Mitsui Financial Group

(SMFG). In this annual report, we review the initiatives implemented in fiscal 2007, ended March 31, 2008,

and explain our management policies for fiscal 2008.

Economic and Financial Conditions in
Fiscal 2007
During fiscal 2007, the economies of Europe held firm, while

the privatization of the operations of Japan’s postal services

in October 2007. In addition, in December 2007, the market-

ing of insurance products by banks and other financial

those of Asia showed generally rapid expansion. In contrast,

institutions was fully granted to banks.

in the wake of the subprime loan crisis, the U.S. economy

showed growing signs of a deceleration, and, in September

and subsequent months, a series of reductions in policy

interest rates was implemented. In Japan, the impact of the

subprime loan problem was marginal, but, as a result of a

slump in private housing investment, a sharp run-up in

prices of energy and raw materials, and other factors, by the

end of fiscal 2007, the economy was showing clear signs of
moving into a period of adjustment.

Principal Initiatives in Fiscal 2007
◆ We made a strong start as a “first step”
towards accomplishing our medium-term
management plan*1, while “coping with
uncertainty in business environment.”*2

*1: For further details, please refer to page 6.

*2: For further details, please refer to page 9.

Amid this economic and financial environment, with the

To increase returns to shareholders, SMFG raised its

and Sumitomo Mitsui Card as the focal points, we will work

annual cash dividend per common share by ¥5,000, to

to achieve economies of scale within the Group and, by fus-

¥12,000. As a result of this increase, we attained our

ing the business bases of alliance partners, seek to

medium-term dividend payout ratio goal of more than 20%.

maximize top-line synergies, and aim to become a “number

Fiscal 2008 Management Policies
The turbulence in the financial markets following the sub-

one credit card entity in Japan.” In addition, in the consumer

finance business, we will continue to promote our collabora-

tive relationship with Promise Co., Ltd., by increasing the

prime loan crisis has still not subsided, and concern about a

number of automated contract machines and responding to

deceleration in economic growth is mounting both in Japan

the sound needs of customers within the context of their

and overseas. Amid these conditions, we have positioned

lifestyles.

fiscal 2008 as a “year for taking step forward to accomplish-

ing the medium-term management plan, while coping with
uncertainty in business environment.” We will, therefore, con-

● Solution Providing for Corporations and

Investment Banking, Trust Business

In the financial markets, beginning in the summer of

beginning of fiscal 2007, we entered the first stage of our

tinue to pursue our two strategic initiatives of “strengthening

For our corporate customers, we will continue to offer high-

2007, long-term market interest rates moved onto a declin-

three-year medium-term management plan entitled “LEAD

targeted growth business areas” and “fortifying platform for

quality solutions that respond accurately to their diverse

ing trend, and, as a result of rising concerns about the future

THE VALUE.” Under this plan, we draw on our three core

supporting sustainable growth.”

course of the U.S. economy, the yen appreciated against the

strengths, which are “Spirit of Innovation,” “Speed,” and

U.S. dollar and the Nikkei stock price average dropped sub-

“Solution & Execution,” as well as focus on two strategic ini-

stantially compared with the end of the previous fiscal year.

tiatives on a Groupwide basis: namely, “strengthening

◆ Strengthening Targeted
Growth Business Areas

business issues by promoting closer collaboration among

Corporate Business Offices and other business offices of the

Middle Market Banking Unit, Corporate Advisory Division,

and Daiwa Securities SMBC Co. Ltd. Moreover, through the

In addition, concern about a credit crunch mounted in the

targeted growth business areas” and “fortifying platform for

● Provide Optimum Added Value to Our Customers

Private Advisory Department, we will move ahead with initia-

financial markets of Europe and the United States because

supporting sustainable growth.” The seven growth areas are

Financial Consulting for Individuals

tives in business areas where needs of individual customers

of the massive losses reported by some financial institutions

Financial consulting services for individuals; Payments &

Foremost, as we seek to strengthen our position in the

and corporate customers co-exist, such as private banking,

as a result of the subprime loan problem.

settlement services, Consumer finance; Solution providing

growth businesses, we would like to further enhance our

workplace banking and business succession consulting.

Amid this operating environment, major developments in

for corporations; Investment banking, Trust business;

“total consulting services” and provide “one-stop” shopping

Also, the Global Advisory Department, which we formed in

Japan’s financial services industry included the implementa-

Focused business areas in global markets; Proprietary

at SMBC for all types of financial services to our individual

April 2008, to enhance teamwork among offices in Japan

tion of the Financial Instruments and Exchange Law in

investment; and Credit derivative, Trading & distribution.

customers. In specific terms, this includes offering insurance

and overseas and strengthen our capabilities for offering

September 2007, which established a broad framework for

At the same time, we took decisive measures to cope

products, such as whole-life, term, medical, and other poli-

solutions to assist companies that are entering overseas

the protection of users of financial instruments and services;

with unpredictability and uncertainty in business environ-

cies, that we can now sell following their full liberalization in

markets and those corporate clients that wish to expand

the implementation of a fully revised Trust Business Law; and

ment that followed the subprime loan crisis. Specifically, we

Teisuke Kitayama
President

Sumitomo Mitsui
Financial Group, Inc.

sold our exposure to subprime-related securitized products

at an early date and made appropriate write-offs and loss

provisions. As a result of these measures, our subprime-

related exposure at the end of the fiscal year under review,

after the deduction of write-offs and loss provisions,

amounted to ¥5.5 billion. We, therefore, believe the impact of

this level of exposure will have only a marginal impact on the

Group’s financial position.

During the fiscal year under review, SMFG’s principal

subsidiary SMBC reported an increase over the previous fis-

cal year in non-consolidated banking profit of ¥79.1 billion,

owing to a combination of improvement in Gains (losses) on

bonds and an increase in interest income from an improve-

ment in the loan-to-deposit spread. These improvements

more than offset the increase in expenses. Net income for

SMFG on a consolidated basis rose ¥20.1 billion over the

previous fiscal year, to ¥461.5 billion, as the rise in Total credit

cost at SMBC and deterioration in Gains on equities were

both offset by the increase in Banking profit and improvement

in profit performance of other Group companies.

December 2007, and introducing a broader range of invest-

ment trusts and individual annuities. We would also like to

substantially improve the services we offer to individuals by

expanding the lineup of discretionary investment account

based asset management services and products of SMBC

Friend Securities, which became a wholly owned subsidiary

of SMFG in September 2006, to create a new “business

model that fuses banking and securities.” In addition, we are

working to increase the number of consultants and reinforce

the skills of personnel through further training. We will also

significantly expand our office network by actively broaden-

ing the variety of outlets through the addition of more

branches, SMBC Consulting Plazas, and SMBC Consulting

Offices, principally in Japan’s three major urban centers.

● Payment & Settlement Services, Consumer Finance

Next, in our credit card business, based on the credit card

business strategy of our group that we announced in Febru-

ary 2008, we are planning to implement a merger among

Central Finance Co., Ltd., OMC Card, Inc., and QOUQ with

a target date of April 2009. With this newly merged company

Masayuki Oku
President

Sumitomo Mitsui
Banking Corporation

SMFG 2008

SMFG 2008 3

Message from the Management

We would like to thank you for your continuing support and patronage of Sumitomo Mitsui Financial Group

(SMFG). In this annual report, we review the initiatives implemented in fiscal 2007, ended March 31, 2008,

and explain our management policies for fiscal 2008.

Economic and Financial Conditions in
Fiscal 2007
During fiscal 2007, the economies of Europe held firm, while

the privatization of the operations of Japan’s postal services

in October 2007. In addition, in December 2007, the market-

ing of insurance products by banks and other financial

those of Asia showed generally rapid expansion. In contrast,

institutions was fully granted to banks.

in the wake of the subprime loan crisis, the U.S. economy

showed growing signs of a deceleration, and, in September

and subsequent months, a series of reductions in policy

interest rates was implemented. In Japan, the impact of the

subprime loan problem was marginal, but, as a result of a

slump in private housing investment, a sharp run-up in

prices of energy and raw materials, and other factors, by the

end of fiscal 2007, the economy was showing clear signs of
moving into a period of adjustment.

*1: For further details, please refer to page 6.

*2: For further details, please refer to page 9.

Amid this economic and financial environment, with the

To increase returns to shareholders, SMFG raised its

and Sumitomo Mitsui Card as the focal points, we will work

annual cash dividend per common share by ¥5,000, to

to achieve economies of scale within the Group and, by fus-

¥12,000. As a result of this increase, we attained our

ing the business bases of alliance partners, seek to

medium-term dividend payout ratio goal of more than 20%.

maximize top-line synergies, and aim to become a “number

Fiscal 2008 Management Policies
The turbulence in the financial markets following the sub-

one credit card entity in Japan.” In addition, in the consumer

finance business, we will continue to promote our collabora-

tive relationship with Promise Co., Ltd., by increasing the

prime loan crisis has still not subsided, and concern about a

number of automated contract machines and responding to

deceleration in economic growth is mounting both in Japan

the sound needs of customers within the context of their

and overseas. Amid these conditions, we have positioned

lifestyles.

fiscal 2008 as a “year for taking step forward to accomplish-

ing the medium-term management plan, while coping with
uncertainty in business environment.” We will, therefore, con-

● Solution Providing for Corporations and

Investment Banking, Trust Business

In the financial markets, beginning in the summer of

beginning of fiscal 2007, we entered the first stage of our

tinue to pursue our two strategic initiatives of “strengthening

For our corporate customers, we will continue to offer high-

2007, long-term market interest rates moved onto a declin-

three-year medium-term management plan entitled “LEAD

targeted growth business areas” and “fortifying platform for

quality solutions that respond accurately to their diverse

ing trend, and, as a result of rising concerns about the future

THE VALUE.” Under this plan, we draw on our three core

supporting sustainable growth.”

course of the U.S. economy, the yen appreciated against the

strengths, which are “Spirit of Innovation,” “Speed,” and

U.S. dollar and the Nikkei stock price average dropped sub-

“Solution & Execution,” as well as focus on two strategic ini-

stantially compared with the end of the previous fiscal year.

tiatives on a Groupwide basis: namely, “strengthening

◆ Strengthening Targeted
Growth Business Areas

business issues by promoting closer collaboration among

Corporate Business Offices and other business offices of the

Middle Market Banking Unit, Corporate Advisory Division,

and Daiwa Securities SMBC Co. Ltd. Moreover, through the

In addition, concern about a credit crunch mounted in the

targeted growth business areas” and “fortifying platform for

● Provide Optimum Added Value to Our Customers

Private Advisory Department, we will move ahead with initia-

financial markets of Europe and the United States because

supporting sustainable growth.” The seven growth areas are

Financial Consulting for Individuals

tives in business areas where needs of individual customers

of the massive losses reported by some financial institutions

Financial consulting services for individuals; Payments &

Foremost, as we seek to strengthen our position in the

and corporate customers co-exist, such as private banking,

as a result of the subprime loan problem.

settlement services, Consumer finance; Solution providing

growth businesses, we would like to further enhance our

workplace banking and business succession consulting.

Amid this operating environment, major developments in

for corporations; Investment banking, Trust business;

“total consulting services” and provide “one-stop” shopping

Also, the Global Advisory Department, which we formed in

Japan’s financial services industry included the implementa-

Focused business areas in global markets; Proprietary

at SMBC for all types of financial services to our individual

April 2008, to enhance teamwork among offices in Japan

tion of the Financial Instruments and Exchange Law in

investment; and Credit derivative, Trading & distribution.

customers. In specific terms, this includes offering insurance

and overseas and strengthen our capabilities for offering

September 2007, which established a broad framework for

At the same time, we took decisive measures to cope

products, such as whole-life, term, medical, and other poli-

solutions to assist companies that are entering overseas

the protection of users of financial instruments and services;

with unpredictability and uncertainty in business environ-

cies, that we can now sell following their full liberalization in

markets and those corporate clients that wish to expand

the implementation of a fully revised Trust Business Law; and

ment that followed the subprime loan crisis. Specifically, we

Teisuke Kitayama
President

Sumitomo Mitsui
Financial Group, Inc.

sold our exposure to subprime-related securitized products

at an early date and made appropriate write-offs and loss

provisions. As a result of these measures, our subprime-

related exposure at the end of the fiscal year under review,

after the deduction of write-offs and loss provisions,

amounted to ¥5.5 billion. We, therefore, believe the impact of

this level of exposure will have only a marginal impact on the

Group’s financial position.

During the fiscal year under review, SMFG’s principal

subsidiary SMBC reported an increase over the previous fis-

cal year in non-consolidated banking profit of ¥79.1 billion,

owing to a combination of improvement in Gains (losses) on

bonds and an increase in interest income from an improve-

ment in the loan-to-deposit spread. These improvements

more than offset the increase in expenses. Net income for

SMFG on a consolidated basis rose ¥20.1 billion over the

previous fiscal year, to ¥461.5 billion, as the rise in Total credit

cost at SMBC and deterioration in Gains on equities were

both offset by the increase in Banking profit and improvement

in profit performance of other Group companies.

December 2007, and introducing a broader range of invest-

ment trusts and individual annuities. We would also like to

substantially improve the services we offer to individuals by

expanding the lineup of discretionary investment account

based asset management services and products of SMBC

Friend Securities, which became a wholly owned subsidiary

of SMFG in September 2006, to create a new “business

model that fuses banking and securities.” In addition, we are

working to increase the number of consultants and reinforce

the skills of personnel through further training. We will also

significantly expand our office network by actively broaden-

ing the variety of outlets through the addition of more

branches, SMBC Consulting Plazas, and SMBC Consulting

Offices, principally in Japan’s three major urban centers.

● Payment & Settlement Services, Consumer Finance

Next, in our credit card business, based on the credit card

business strategy of our group that we announced in Febru-

ary 2008, we are planning to implement a merger among

Central Finance Co., Ltd., OMC Card, Inc., and QOUQ with

a target date of April 2009. With this newly merged company

Masayuki Oku
President

Sumitomo Mitsui
Banking Corporation

SMFG 2008

SMFG 2008 3

existing operations. In our investment banking operations,

● Focused Business Areas in Global Markets

last fiscal year, we ranked number one for the first time in the

In overseas markets, demand for funds in the natural

domestic syndicated loan league table (Note 1). We will con-

resource, energy, and other areas is strong, but in the wake

tinue to offer a diverse range of financing methods, including

of the subprime loan crisis, the competitive environment vis-

structured finance, and continue to steadily strengthen our

à-vis European and U.S. banks has changed, leading to an

Fortifying Platform for Supporting
Sustainable Growth
◆ Becoming a “Globally Competitive
Financial Services Group with the
Highest Trust”

income on a consolidated basis for SMFG of ¥480 billion.

Both of these figures will represent increases over the previ-

ous fiscal year. In addition, we are planning to increase

dividends per common share by ¥2,000, to a total of

¥14,000 for the full fiscal year (Note 2). We will continue to

capabilities for offering proposals for business expansion

expansion in opportunities for SMFG. However, the course of

Our second strategic initiative is to implement policies for

seek to attain a well-balanced growth cycle of profitability,

and restructuring through M&A as well as other solutions to

future development in the financial markets and the real

fortifying our operational platform to support sustainable

capital base, and risk assets, implying that we will expand

meet customer needs. In addition, we will move forward with

economy has become less clear than in the past. We are,

growth. In the area of compliance, which is one of the key

our capital base through the further accumulation of retained

initiatives to provide support for venture businesses and

therefore, appraising changes in the market environment

related requirements, strict and thorough observance of laws

earnings, invest in risk assets with a view to growth busi-

growth companies as well as promote activities in growth

carefully and intend to take steady initiatives, while adopting

and regulations in Japan and elsewhere will continue to be

nesses, and work to enhance our risk-return profile. By

areas, such as environment-related businesses, including

an approach that allows for both aggressive action and

implemented in order to build a stronger ethical foundation

maintaining this well-balanced flow, we aim to create sus-

trading in emission rights.

Moreover, based on the strategic alliance SMFG con-

defensive measures. In more specific terms, in those mar-
kets that are expected to show high rates of growth going

for our activities. In addition, regarding customer satisfaction
and quality enhancement, we intend to further strengthen

tainable shareholder value of our Group.

cluded with the Sumitomo Corporation Group in October

forward, such as China, Southeast Asia, the Middle East,

our systems for taking action based on our customers’ sug-

As we have outlined in this message, we are making

2007, we have formed SMFG Finance and Leasing Com-

and Eastern Europe, we will strengthen our office network,

gestions and requests.

steady advances toward attaining the targets of our

pany, Ltd., through the merger of SMBC Leasing Company,

expand the number of personnel, and take other measures

In the area of risk management, we are moving ahead

medium-term management plan with the aim of responding

Limited, and Sumisho Lease Co., Ltd., and the newly formed

to promote the development of our activities in these areas.

steadily with the measures we introduced in fiscal 2006

to the trust and confidence placed in us by our stakeholders.

company is engaged in offering a diverse range of leasing

In addition to these activities, SMBC has invested approxi-

under Basel II (the new BIS regulations) and substantially

As we continue this endeavor, we look forward to your con-

services. In addition, we intend to pursue further possibilities

mately GBP500 million and entered into collaborative

increase the sophistication of our risk management systems.

tinued support and understanding.

for offering business solutions drawing on the capabilities of

agreement with Barclays PLC, one of the leading financial

the Group as a whole. These activities include offering sys-

institutions in the United Kingdom, in June 2008.

tems development and operating services as well as

security-related consulting and other services through the

Group company JRI Solutions, Ltd.

◎ Becoming a “Globally Competitive Financial Services Group with the Highest Trust”

Fiscal 2007 to Fiscal 2009

Fiscal 2010 Onward

t
n
e
m
e
g
a
n
a
M

s
t
e
g
r
a
T

“Aim for top quality in growth business areas”

“Realize solid financial base as a global player”

“Increase returns to shareholders”

To become one of the
“top global financial services groups”

h
t
w
o
r
G
e
b
a
n
a
t
s
u
S

r
o
f

s
p
e
t
S

”
s
d
n
e
r
t
o
r
c
a
M
“

Strengthen growth businesses and
establish platform to leap forward

Further improve and expand competences
acquired through strengthening
growth businesses

Establish a solid position as a
global player leveraging
core competences

Deregulations and tightening
of regulations

Plan for strengthening competitiveness of Japan’s financial and capital markets

Economic and financial globalization

Pursue growth opportunities overseas

NYSE listing plan

“Great Investment Era”

Subprime loan crisis

Process of price adjustment in risk assets

Tide of Generational change

Expansion of ubiquitous network

We are also stepping up our support and guidance for the

Corporate Business Offices and other business offices of the

Middle Market Banking Unit to substantially reinforce and

strengthen our credit management systems.

In addition, to strengthen our systems as globalization

proceeds, we are aiming to be a “globally competitive finan-

cial services group with the highest trust” and are

July 2008

considering a listing on the New York Stock Exchange

(NYSE).

◆ Aiming to Create Sustainable

Shareholder Value

Through the various initiatives we have mentioned, we are

aiming to attain our three management targets stated in our

medium-term management plan of “aiming for top quality in

growth business areas,” “realizing solid financial base as a

Teisuke Kitayama

Masayuki Oku

global player,” and “increasing return to shareholders.”

President

Our outlook for fiscal 2008 calls for Net income on a

non-consolidated basis at SMBC of ¥390 billion and Net

Sumitomo Mitsui
Financial Group, Inc.

President

Sumitomo Mitsui
Banking Corporation

Notes: 1. Thomson Financial, Syndication Mandated Arranger Ranking for

Japan in fiscal 2007

2. Before taking account of the stock split scheduled for January 2009

SMFG 2008

SMFG 2008 5

existing operations. In our investment banking operations,

● Focused Business Areas in Global Markets

last fiscal year, we ranked number one for the first time in the

In overseas markets, demand for funds in the natural

domestic syndicated loan league table (Note 1). We will con-

resource, energy, and other areas is strong, but in the wake

tinue to offer a diverse range of financing methods, including

of the subprime loan crisis, the competitive environment vis-

structured finance, and continue to steadily strengthen our

à-vis European and U.S. banks has changed, leading to an

Fortifying Platform for Supporting
Sustainable Growth
◆ Becoming a “Globally Competitive
Financial Services Group with the
Highest Trust”

income on a consolidated basis for SMFG of ¥480 billion.

Both of these figures will represent increases over the previ-

ous fiscal year. In addition, we are planning to increase

dividends per common share by ¥2,000, to a total of

¥14,000 for the full fiscal year (Note 2). We will continue to

capabilities for offering proposals for business expansion

expansion in opportunities for SMFG. However, the course of

Our second strategic initiative is to implement policies for

seek to attain a well-balanced growth cycle of profitability,

and restructuring through M&A as well as other solutions to

future development in the financial markets and the real

fortifying our operational platform to support sustainable

capital base, and risk assets, implying that we will expand

meet customer needs. In addition, we will move forward with

economy has become less clear than in the past. We are,

growth. In the area of compliance, which is one of the key

our capital base through the further accumulation of retained

initiatives to provide support for venture businesses and

therefore, appraising changes in the market environment

related requirements, strict and thorough observance of laws

earnings, invest in risk assets with a view to growth busi-

growth companies as well as promote activities in growth

carefully and intend to take steady initiatives, while adopting

and regulations in Japan and elsewhere will continue to be

nesses, and work to enhance our risk-return profile. By

areas, such as environment-related businesses, including

an approach that allows for both aggressive action and

implemented in order to build a stronger ethical foundation

maintaining this well-balanced flow, we aim to create sus-

trading in emission rights.

Moreover, based on the strategic alliance SMFG con-

defensive measures. In more specific terms, in those mar-
kets that are expected to show high rates of growth going

for our activities. In addition, regarding customer satisfaction
and quality enhancement, we intend to further strengthen

tainable shareholder value of our Group.

cluded with the Sumitomo Corporation Group in October

forward, such as China, Southeast Asia, the Middle East,

our systems for taking action based on our customers’ sug-

As we have outlined in this message, we are making

2007, we have formed SMFG Finance and Leasing Com-

and Eastern Europe, we will strengthen our office network,

gestions and requests.

steady advances toward attaining the targets of our

pany, Ltd., through the merger of SMBC Leasing Company,

expand the number of personnel, and take other measures

In the area of risk management, we are moving ahead

medium-term management plan with the aim of responding

Limited, and Sumisho Lease Co., Ltd., and the newly formed

to promote the development of our activities in these areas.

steadily with the measures we introduced in fiscal 2006

to the trust and confidence placed in us by our stakeholders.

company is engaged in offering a diverse range of leasing

In addition to these activities, SMBC has invested approxi-

under Basel II (the new BIS regulations) and substantially

As we continue this endeavor, we look forward to your con-

services. In addition, we intend to pursue further possibilities

mately GBP500 million and entered into collaborative

increase the sophistication of our risk management systems.

tinued support and understanding.

for offering business solutions drawing on the capabilities of

agreement with Barclays PLC, one of the leading financial

the Group as a whole. These activities include offering sys-

institutions in the United Kingdom, in June 2008.

tems development and operating services as well as

security-related consulting and other services through the

Group company JRI Solutions, Ltd.

◎ Becoming a “Globally Competitive Financial Services Group with the Highest Trust”

Fiscal 2007 to Fiscal 2009

Fiscal 2010 Onward

t
n
e
m
e
g
a
n
a
M

s
t
e
g
r
a
T

“Aim for top quality in growth business areas”

“Realize solid financial base as a global player”

“Increase returns to shareholders”

To become one of the
“top global financial services groups”

h
t
w
o
r
G
e
b
a
n
a
t
s
u
S

r
o
f

s
p
e
t
S

”
s
d
n
e
r
t
o
r
c
a
M
“

Strengthen growth businesses and
establish platform to leap forward

Further improve and expand competences
acquired through strengthening
growth businesses

Establish a solid position as a
global player leveraging
core competences

Deregulations and tightening
of regulations

Plan for strengthening competitiveness of Japan’s financial and capital markets

Economic and financial globalization

Pursue growth opportunities overseas

NYSE listing plan

“Great Investment Era”

Subprime loan crisis

Process of price adjustment in risk assets

Tide of Generational change

Expansion of ubiquitous network

We are also stepping up our support and guidance for the

Corporate Business Offices and other business offices of the

Middle Market Banking Unit to substantially reinforce and

strengthen our credit management systems.

In addition, to strengthen our systems as globalization

proceeds, we are aiming to be a “globally competitive finan-

cial services group with the highest trust” and are

July 2008

considering a listing on the New York Stock Exchange

(NYSE).

◆ Aiming to Create Sustainable

Shareholder Value

Through the various initiatives we have mentioned, we are

aiming to attain our three management targets stated in our

medium-term management plan of “aiming for top quality in

growth business areas,” “realizing solid financial base as a

Teisuke Kitayama

Masayuki Oku

global player,” and “increasing return to shareholders.”

President

Our outlook for fiscal 2008 calls for Net income on a

non-consolidated basis at SMBC of ¥390 billion and Net

Sumitomo Mitsui
Financial Group, Inc.

President

Sumitomo Mitsui
Banking Corporation

Notes: 1. Thomson Financial, Syndication Mandated Arranger Ranking for

Japan in fiscal 2007

2. Before taking account of the stock split scheduled for January 2009

SMFG 2008

SMFG 2008 5

Supplementary Information Ⅰ
● Initiatives in Growth Business Areas

◎ Basic Policies

To steadily move forward toward accomplishing the medium-term management plan, we are reinforcing our initiatives in growth business
areas through both organic and inorganic approach.

Financial consulting
for individuals

Solution providing for corporations/
Investment banking, trust business

Payment & settlement service,
Consumer finance

Proprietary investment

Consolidated net business profit

¥1,022.9 billion

Consolidated net income

¥461.5 billion

Consolidated total assets

Market capitalization*1

¥112 trillion

¥6.6 trillion

Banking profit*2

¥819.7 billion

Middle Market

Consumar

Corporate

Treasury

International

(Actual figures for fiscal 2007)

Focused business areas
in global markets

● Vietnam Eximbank
● First Commercial Bank (Taiwan)
● Industrial and
Commercial Bank of China
● Kookmin Bank (Korea)

Credit derivative,
Trading & distribution

*1: As of May 23, 2008
*2: Managerial accounting basis. The graph excludes the portion supervised by Headquarters (Banking profit of negative ¥135.7 billion for fiscal 2007).

◎ Payment & Settlement Service, Consumer Finance
Implementation of Group Strategy for Credit Card Business

SMFG is aiming to become the number one credit card entity in Japan by realizing top-line synergies as it fuses the expertise, customer bases, and networks of Group card
companies as well as taking advantage of cost synergies generated by economies of scale throughout the Group.

Newly Merged Companies*2

Top-Line Synergies

● Promote teamwork in marketing alliance partner cards
● Expand subcontracted business
● Mutual complimentary functions, sharing of know-how

Cost Synergies

● Unification of systems and processing
● Centralization of merchant servicing operations

Number of cardholders: 22.29 million*3

● Original solicitation know-how and marketing
capabilities nurtured through the customers’
perspective
● Fine-tuned marketing systems linked to
installment sales business

Number of cardholders: 16.41 million*1

● Advanced technology, sophisticated
infrastructure functions (Including Sumitomo
Mitsui Card iD and other features)
● One of the largest acquirers in Japan
● Strong brand

Medium-Term Objectives
(For fiscal 2011)

Total shopping charges handled:

¥1.2 trillion

20% market share

Total operating profit:

Between ¥60-70 billion

*1: As of March 31, 2008
*2: Merger scheduled for April 2009
*3: Total cardholders of the three companies (Figures for OMC Card are as of February 29, 2008, and those for Central Finance and QUOQ are as of March 31, 2008).

◎ Solution Providing for Corporations

Through the seamless approach as “One Bank” centered on the Corporate Business Offices and other marketing channels, SMBC is well positioned to offer proposals to
contribute to solving a diverse range of customers’ management issues.

Corporate Advisory Division

Formed in Apr. 06

Formed in Apr. 07

Private Advisory Department

Principal Services and Products

(cid:129) M&A, alliances
(cid:129) Financing
(cid:129) Capital strategy, other

Principal Accomplishments in Fiscal 2007

(cid:129) Increase in the number of deals (Mar. 08)
YOY change + approx. 40%
Steady expansion in related income
YOY change + approx. 20%

(cid:129)

Principal Services and Products

(cid:129) Business succession consulting
(cid:129) Workplace banking
(cid:129) Private banking

Principal Accomplishments in Fiscal 2007

(cid:129) Business succession consulting

(new origination of related loan)

YOY change + approx. 150%

(cid:129) Workplace banking

(nomination as DC operation management institution)*2

YOY change + approx. 150%

(cid:129) Private banking

(balance of investment products)

YOY change + approx. 40%

Corporate Business
Offices, etc.

185 offices*1

Global Advisory Department

(Formed in Apr. 08)

Objective:

(cid:129)

Strengthen capabilities for offering solutions for companies expanding
their operations globally

Measures
implemented:

(cid:129) Increased overseas personnel, principally in China and other parts of Asia
(cid:129) Reinforced teamwork between domestic and overseas operations

Services and
products:

(cid:129) Restructuring global organizations, dealing with transfer pricing taxation
(cid:129) Assistance for entering overseas markets and sales activities, other

*1: Number of business locations of the
Corporate Banking Unit as of March 31, 2008
*2: Number of employees

◎ Focused Business Areas in Global Markets

Activities include expansion of the marketing network in the high-growth markets of Asia, the Middle East, Eastern Europe, and elsewhere;
aggressive promotion of strategic alliances and improvements in systems; and further improvements in selected products where the Group has competitive strengths.

Eastern Europe and Russia

2 business offices

Asia

26 business offices

Newly established offices

Strategic alliances

(cid:129) Prague Representative Office (Apr. 08)
(cid:129) Investment Agencies of the Czech Republic and Poland

(Oct. − Nov. 07)

Middle East

4 business offices

Newly established offices (cid:129) Dubai Branch (Mar. 07)

(cid:129) Doha QFC Representative Office (Apr. 08)

Proposals related to support for Japanese companies entering markets in the region

Investment in Barclays PLC

SMBC invested in Barclays through purchase of shares in a third-party
allotment (approx. GBP 500 million: Jul. 08).

Newly established offices

(cid:129) Tianjin Binhai Sub-Branch (Mar. 07)
(cid:129)
(cid:129)

Suzhou Industrial Park Sub-Branch (Apr. 07)
Beijing Branch (Feb. 08)

Strategic alliances

(cid:129) Vietnam Eximbank (Basic agreement: Nov. 07)
(cid:129)
(cid:129)

First Commercial Bank (Taiwan) (Basic agreement: Dec. 07)
Industrial and Commercial Bank of China (Basic agreement: Mar. 08)

Business promotion sysytem

(cid:129) Establishment of Asia Pacific Division (Apr. 08)

Created more flexible and responsive systems through establishment of
overall control center in the region

Specifics of the business collaboration are currently under consideration.

(cid:129) Increased number of personnel stationed overseas

Further Reinforcing Specific Products

Syndicated Loans*1

Project Finance*2

Ship Finance*3

6th

#1 among
Japanese
banks

7th

#1 among
Japanese
banks

9th

#1 among
Japanese
banks

Working to substantially
enhance capabilities in these
areas through system upgrades
and expansion in personnel

*1: Thomson Financial, Syndicated loan Mandated Arranger Ranking for 2007
*2: Thomson Financial, Project Finance Mandated Arranger Ranking for 2007
*3: Dealogic, Ship Finance Mandated Arranger Ranking for 2007

SMFG 2008

SMFG 2008 7

Supplementary Information Ⅰ
● Initiatives in Growth Business Areas

◎ Basic Policies

To steadily move forward toward accomplishing the medium-term management plan, we are reinforcing our initiatives in growth business
areas through both organic and inorganic approach.

Financial consulting
for individuals

Solution providing for corporations/
Investment banking, trust business

Payment & settlement service,
Consumer finance

Proprietary investment

Consolidated net business profit

¥1,022.9 billion

Consolidated net income

¥461.5 billion

Consolidated total assets

Market capitalization*1

¥112 trillion

¥6.6 trillion

Banking profit*2

¥819.7 billion

Middle Market

Consumar

Corporate

Treasury

International

(Actual figures for fiscal 2007)

Focused business areas
in global markets

● Vietnam Eximbank
● First Commercial Bank (Taiwan)
● Industrial and
Commercial Bank of China
● Kookmin Bank (Korea)

Credit derivative,
Trading & distribution

*1: As of May 23, 2008
*2: Managerial accounting basis. The graph excludes the portion supervised by Headquarters (Banking profit of negative ¥135.7 billion for fiscal 2007).

◎ Payment & Settlement Service, Consumer Finance
Implementation of Group Strategy for Credit Card Business

Newly Merged Companies*2

Top-Line Synergies

● Promote teamwork in marketing alliance partner cards
● Expand subcontracted business
● Mutual complimentary functions, sharing of know-how

Cost Synergies

● Unification of systems and processing
● Centralization of merchant servicing operations

Number of cardholders: 22.29 million*3

● Original solicitation know-how and marketing
capabilities nurtured through the customers’
perspective
● Fine-tuned marketing systems linked to
installment sales business

Number of cardholders: 16.41 million*1

● Advanced technology, sophisticated
infrastructure functions (Including Sumitomo
Mitsui Card iD and other features)
● One of the largest acquirers in Japan
● Strong brand

Medium-Term Objectives
(For fiscal 2011)

Total shopping charges handled:

¥1.2 trillion

20% market share

Total operating profit:

Between ¥60-70 billion

◎ Solution Providing for Corporations

Corporate Advisory Division

Formed in Apr. 06

Formed in Apr. 07

Private Advisory Department

Principal Services and Products

(cid:129) M&A, alliances
(cid:129) Financing
(cid:129) Capital strategy, other

Principal Accomplishments in Fiscal 2007

(cid:129) Increase in the number of deals (Mar. 08)
YOY change + approx. 40%
Steady expansion in related income
YOY change + approx. 20%

(cid:129)

Principal Services and Products

(cid:129) Business succession consulting
(cid:129) Workplace banking
(cid:129) Private banking

Principal Accomplishments in Fiscal 2007

(cid:129) Business succession consulting

(new origination of related loan)

YOY change + approx. 150%

(cid:129) Workplace banking

(nomination as DC operation management institution)*2

YOY change + approx. 150%

(cid:129) Private banking

(balance of investment products)

YOY change + approx. 40%

Corporate Business
Offices, etc.

185 offices*1

Global Advisory Department

(Formed in Apr. 08)

Objective:

(cid:129)

Strengthen capabilities for offering solutions for companies expanding
their operations globally

Measures
implemented:

(cid:129) Increased overseas personnel, principally in China and other parts of Asia
(cid:129) Reinforced teamwork between domestic and overseas operations

Services and
products:

(cid:129) Restructuring global organizations, dealing with transfer pricing taxation
(cid:129) Assistance for entering overseas markets and sales activities, other

*1: Number of business locations of the
Corporate Banking Unit as of March 31, 2008
*2: Number of employees

◎ Focused Business Areas in Global Markets

Eastern Europe and Russia

2 business offices

Asia

26 business offices

Newly established offices

Strategic alliances

(cid:129) Prague Representative Office (Apr. 08)
(cid:129) Investment Agencies of the Czech Republic and Poland

(Oct. − Nov. 07)

Middle East

4 business offices

Newly established offices (cid:129) Dubai Branch (Mar. 07)

(cid:129) Doha QFC Representative Office (Apr. 08)

Proposals related to support for Japanese companies entering markets in the region

Investment in Barclays PLC

SMBC invested in Barclays through purchase of shares in a third-party
allotment (approx. GBP 500 million: Jul. 08).

Newly established offices

(cid:129) Tianjin Binhai Sub-Branch (Mar. 07)
(cid:129)
(cid:129)

Suzhou Industrial Park Sub-Branch (Apr. 07)
Beijing Branch (Feb. 08)

Strategic alliances

(cid:129) Vietnam Eximbank (Basic agreement: Nov. 07)
(cid:129)
(cid:129)

First Commercial Bank (Taiwan) (Basic agreement: Dec. 07)
Industrial and Commercial Bank of China (Basic agreement: Mar. 08)

Business promotion sysytem

(cid:129) Establishment of Asia Pacific Division (Apr. 08)

Created more flexible and responsive systems through establishment of
overall control center in the region

Specifics of the business collaboration are currently under consideration.

(cid:129) Increased number of personnel stationed overseas

Further Reinforcing Specific Products

Syndicated Loans*1

Project Finance*2

Ship Finance*3

6th

#1 among
Japanese
banks

7th

#1 among
Japanese
banks

9th

#1 among
Japanese
banks

Working to substantially
enhance capabilities in these
areas through system upgrades
and expansion in personnel

SMFG 2008

SMFG 2008 7

2004

2005

2006

2007

2008

2005

2006

2007

2008

Subprime related products (As of March 31, 2008)

◎ Performance in Growth Businesses (SMBC Non-Consolidated) (Note: Figures in the green circles are average compound annual growth rates.)

Customer Assets

(Investment Trusts and
Pension-Type Insurance)

Housing Loans

Consumer Finance (Term-end balance)

Unit: ¥ trillion, term-end

■ Cumulative sales of pension-type insurance
■ Balance of investment trusts

Unit: ¥ trillion

■ Securitized balance ■ Balance outstanding

Unit: ¥ billion

■ Unsecured card loans
■ Including, portion under tie-up with Promise

2.2

2.6

1.7

+33%

3.0

3.4

2.8

1.1

2.3

0.5

1.9

2004

2005

2006

2007

2008
(FY)

Loan Syndications

■ Amount originated (¥ trillion)

Number of origination

702

670

779

754

8.6

7.1

6.7

490

6.1

5.5

+12%

349

4.6

800

600

400

200

1.9

1.6

9.9

10.0

0.8
10.0

0.1

0.4

9.5

8.9

+8%

500

400

300

200

100

441

390

330

270

+20%

290

140

Business Select Loans (Term-end balance)

Global e-Trade Service (Number of Contracts)

Unit: ¥ billion

Unit: Thousands of contracts

Note: During FY2007, about ¥300 billion of these loans were
securitized. Managerial accounting basis including corporate
bonds.

1,800

1,500

1,200

900

600

300

15.0

13.7

11.7

9.7

+48%

+19%

2003

2004

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

2005

2006

2007

2008

PC Bank Web21 (Number of Contracts)

One’s Direct Customer Contracts

Number of Internet Transactions

Unit: Thousands of contract

Unit: Million customers

Unit: Millions

141

125

105

+24%

150

120

8.4

7.0

6.6

5.8

4.8

+21%

3.3

151

129

108

+36%

180

120

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

SMFG 2008

Supplementary Information Ⅱ
Coping with Uncertainty in Business Environment

◎ Prevent Additional Losses by Quickly Dealing with Subprime Loan Problem
To deal decisively with the Group’s exposure to subprime-related securitized products, approximately ¥350 billion of these exposures was sold, and appropriate write-
offs and loss provisions were made in the first half of fiscal 2007. As a result, as of March 31, 2008, the Group’s subprime-related exposure after provisions and
write-offs was ¥5.5 billion. We believe that possible financial impact on the Group will be marginal.

Further, the Group’s exposure to non-subprime-related securitized products was approximately ¥260 billion after write-offs and loss provisions. The majority of

the exposure was mortgage bonds guaranteed by Government Sponsored Entities (“GSEs”) with AAA ratings.

Regarding the Group’s exposure to monoline insurance companies, credit derivative transactions (credit default swaps) with monoline insurance companies that expe-
rienced a major decline in creditworthiness totaled approximately ¥30 billion. To avoid any future losses on these transactions, the full amount was written off and
recognized as loss. As a result, remaining CDS exposure to monoline insurance companies, after making provisions was approximately ¥30 billion as of March 31,
2009. Moreover, the total amount of investment and loan exposures backed by monoline insurance company guarantees as of March 31, 2008, was approximately
¥40 billion. The exposures are investment grade equivalent non-subprime-related exposures.

Balance
(before provisions and
write-offs)

(¥ billion)

Net unrealized gains (losses)
(before write-offs)

Provisions and
write-offs

Balance
(after provisions and
write-offs)

Investments to securitized products

Warehousing loans, etc.*

Total

73.5

21.1

94.6

(68.6)

—

(68.6)

68.6

20.5

89.1

4.9

0.6

5.5

Credit ratings of
underlying assets

Speculative ratings, etc..

* Among warehousing loans, etc., the balance of exposure secured by collateral other than that linked to subprime loans, as of March 31, 2008, was ¥14.3 billion (before write-offs) and
write-offs and loss provisions against these loans amounted to ¥8.4 billion. (All such loans were overseas.)

Losses recognized linked to subprime loans totaled ¥93.0
billion (comprising provisions and write-offs of ¥89.1 billion
and losses on sale of ¥3.9 billion)

(SMFG consolidated basis)

(For Reference) Products other than subprime related (As of March 31, 2008)

(¥ billion)

Balance
(before provisions and
write-offs)

Net unrealized gains (losses)
(before write-offs)

Provisions and
write-offs

Balance
(after provisions and
write-offs)

Credit ratings of
underlying assets

RMBS (Guaranteed by GSE etc.)

Cards

CLO

CMBS

Total

219.8

12.5

24.3

6.0

262.6

(1.6)

(0.6)

(3.4)

0.0

(5.6)

—

0.4

—

0.4

219.8

AAA

12.5

23.9

6.0

262.2

A—BBB
AAA—A
(Some securities
without ratings)

BBB

Exposure Linked to Monoline Insurance Companies (As of March 31, 2008)

(¥ billion)

Net exposure*

Loan loss reserve*

Amount of reference assets*

Exposure to CDS transactions with
monoline insurance companies

31.1

1.9

559.1

* These figures do not include the portion written off as loss (about ¥30 billion)

(¥ billion)

Balance

Loss provisions

Investments and loans, guaranteed by
monoline insurance companies

41.7

—

The claims are project finance, regional government bonds, and other
claims with investment grade equivalent, unrelated to subprime loans.

(For reference) In addition to the above exposures, there are exposures amounting to approximately ¥16.0 billion (drawn-down amount ¥10 million) including a commitment line
to an insurance company whose group member is a monoline insurance company.

(SMFG consolidated basis)

SMFG 2008 9

2004

2005

2006

2007

2008

2005

2006

2007

2008

Subprime related products (As of March 31, 2008)

◎ Performance in Growth Businesses (SMBC Non-Consolidated) (Note: Figures in the green circles are average compound annual growth rates.)

Customer Assets

(Investment Trusts and
Pension-Type Insurance)

Housing Loans

Consumer Finance (Term-end balance)

Unit: ¥ trillion, term-end

■ Cumulative sales of pension-type insurance
■ Balance of investment trusts

Unit: ¥ trillion

■ Securitized balance ■ Balance outstanding

Unit: ¥ billion

■ Unsecured card loans
■ Including, portion under tie-up with Promise

2.2

2.6

1.7

+33%

3.0

3.4

2.8

1.1

2.3

0.5

1.9

2004

2005

2006

2007

2008
(FY)

Loan Syndications

■ Amount originated (¥ trillion)

Number of origination

702

670

779

754

8.6

7.1

6.7

490

6.1

5.5

+12%

349

4.6

800

600

400

200

1.9

1.6

9.9

10.0

0.8
10.0

0.1

0.4

9.5

8.9

+8%

500

400

300

200

100

441

390

330

270

+20%

290

140

Business Select Loans (Term-end balance)

Global e-Trade Service (Number of Contracts)

Unit: ¥ billion

Unit: Thousands of contracts

Note: During FY2007, about ¥300 billion of these loans were
securitized. Managerial accounting basis including corporate
bonds.

1,800

1,500

1,200

900

600

300

15.0

13.7

11.7

9.7

+48%

+19%

2003

2004

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

2005

2006

2007

2008

PC Bank Web21 (Number of Contracts)

One’s Direct Customer Contracts

Number of Internet Transactions

Unit: Thousands of contract

Unit: Million customers

Unit: Millions

141

125

105

+24%

150

120

8.4

7.0

6.6

5.8

4.8

+21%

3.3

151

129

108

+36%

180

120

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

SMFG 2008

Supplementary Information Ⅱ
Coping with Uncertainty in Business Environment

Further, the Group’s exposure to non-subprime-related securitized products was approximately ¥260 billion after write-offs and loss provisions. The majority of

the exposure was mortgage bonds guaranteed by Government Sponsored Entities (“GSEs”) with AAA ratings.

Balance
(before provisions and
write-offs)

(¥ billion)

Net unrealized gains (losses)
(before write-offs)

Provisions and
write-offs

Balance
(after provisions and
write-offs)

Investments to securitized products

Warehousing loans, etc.*

Total

73.5

21.1

94.6

(68.6)

—

(68.6)

68.6

20.5

89.1

4.9

0.6

5.5

Credit ratings of
underlying assets

Speculative ratings, etc..

Losses recognized linked to subprime loans totaled ¥93.0
billion (comprising provisions and write-offs of ¥89.1 billion
and losses on sale of ¥3.9 billion)

(SMFG consolidated basis)

(For Reference) Products other than subprime related (As of March 31, 2008)

(¥ billion)

Balance
(before provisions and
write-offs)

Net unrealized gains (losses)
(before write-offs)

Provisions and
write-offs

Balance
(after provisions and
write-offs)

Credit ratings of
underlying assets

RMBS (Guaranteed by GSE etc.)

Cards

CLO

CMBS

Total

219.8

12.5

24.3

6.0

262.6

(1.6)

(0.6)

(3.4)

0.0

(5.6)

—

0.4

—

0.4

219.8

AAA

12.5

23.9

6.0

262.2

A—BBB
AAA—A
(Some securities
without ratings)

BBB

Exposure Linked to Monoline Insurance Companies (As of March 31, 2008)

(¥ billion)

Net exposure*

Loan loss reserve*

Amount of reference assets*

Exposure to CDS transactions with
monoline insurance companies

31.1

1.9

559.1

* These figures do not include the portion written off as loss (about ¥30 billion)

(¥ billion)

Balance

Loss provisions

Investments and loans, guaranteed by
monoline insurance companies

41.7

—

The claims are project finance, regional government bonds, and other
claims with investment grade equivalent, unrelated to subprime loans.

(SMFG consolidated basis)

SMFG 2008 9

Outline of “LEAD THE VALUE” Plan
— SMFG’s Medium-Term Management Plan

In October 2006, SMFG completed the repayment of public funds,

the added value inherent in these strengths, we are aiming to be a

and, in view of major changes in the economic and competitive

globally competitive financial services group with the highest trust.

environment surrounding the Group, launched a medium-term

Accordingly, we have set the following targets during the cur-

management plan entitled “LEAD THE VALUE” plan covering the

rent medium-term management plan:

three years from fiscal 2007 to fiscal 2009.

In preparing our plan, we reaffirmed that the most important

requirement for achieving sustainable growth is to offer customers

value that exceeds their expectations and leads customers in

directions that help them to create new value. The new plan also

● Aim for top quality in growth business areas,
● Realize solid financial base as a global player, and
● Increase returns to shareholders.

◎ Concept of Strategic Initiatives in the

“LEAD THE VALUE” Plan

and a labor shortage. The magnitude of these changes has

exceeded the assumptions that formed the basis for the previous

management plan. Therefore, to continue our growth in today’s

SMFG has increased profitability by identifying strategic busi-

competitive environment, going forward, we must be sure that we

nesses with strong growth potential at early stages and developed

have an accurate grasp of macroeconomic trends that are likely to

highly productive and efficient proprietary business models to con-

bring opportunities for earning profits and competing both in

solidate its position in these business areas. As a result, the quality

Japan and at the global level. The previous policies of maximizing

of our assets has improved substantially, and net income has

earnings by restructuring and streamlining our operations are no

recovered, enabling us to complete the repayment of public funds

longer likely to be sufficient. Instead, we must make substantial

reconfirms that SMFG’s core strengths are the “Spirit of Innovation,”

To attain these targets, we are focusing on two strategic initia-

in fiscal 2006, about one-and-a-half years earlier than initially

investments aimed at growth from a medium- to long-term per-

“Speed,” and “Solution & Execution,” the drivers behind our ability

tives: namely, strengthening targeted growth business areas and

planned. Overall, we have made steady progress toward enhanc-

spective to lay the foundations for sustainable growth. This is why

to quickly make strategic businesses profitable. By drawing fully on

fortifying platform for supporting sustainable growth.

ing our profitability and strengthening our financial position.

we have identified two key strategic initiatives under our “LEAD

◎ Our Objectives under
the Medium-Term
Management Plan,
“LEAD THE VALUE” Plan

“A Globally Competitive Financial Services Group
with the Highest Trust”

“LEAD THE VALUE” Plan

Spirit of
Innovation

Speed

Solution &
Execution

Our Mission

To provide optimum value added to our customers and together with them achieve growth

To create sustainable shareholder value through business growth

To provide a challenging and professionally rewarding work environment for our dedicated employees

◎ Outline of “LEAD THE VALUE” Plan

“LEAD THE VALUE” Plan

Aim to become “a globally competitive
financial services group with the highest trust” by
making the most of our strengths to LEAD THE VALUE

LEAD the way in
helping customers create
and deliver new VALUE

stren gt h
Our

v a l u e a d d ed (the originsofourcorporate

Spirit of
Innovation

a
l

)

Speed

Solution &
Execution

Fiscal 2007 to Fiscal 2009

Strategic
Initiatives

●Strengthen targeted
growth business areas

“Seven Growth Areas”

●Fortify platform for supporting
sustainable growth

Management Targets

● Aim for top quality in growth business areas

● Realize solid financial base as a global player

● Increase returns to shareholders
(realize payout ratio of more than 20%)

Financial targets for fiscal 2009
(SMFG consolidated)

● Net income: ¥650 billion
● Net income RORA: Approx. 1%
● Tier I ratio: Approx. 8%
● Overhead ratio: 40-45%
(SMBC non-consolidated)

● ROE (SMFG consolidated):10-15%

In parallel with this improvement in performance, however, dra-

THE VALUE” plan: namely, “strengthening targeted growth busi-

matic changes have reshaped our operating environment,

ness areas” and “fortifying platform for supporting sustainable

including more-intense competition in the domestic loan market

growth.”

◎ Strategic Initiatives under the “LEAD THE VALUE” Plan

Five Macrotrends

Tide of
Generational
change

Economic and
financial
globalization

Deregulations
and tightening of
regulations

Expansion of
ubiquitous
network

“Great
Investment Era”

Strengthen Targeted Growth Business Areas: “Seven Growth Areas”

Financial consulting
services for
individuals

Solution providing
for corporations

Focused business
areas in
global markets

Payment &
settlement services,
Consumer finance

Investment banking,
Trust business

Proprietary
investment

Credit derivatives,
Trading &
distribution

Fortify Platform for Supporting Sustainable Growth

Business performance evaluation
system with medium-term
viewpoint

Framework to secure and develop
professionals

Reinforce IT and operational
infrastructure

Improve ALM and risk management,
Strengthen compliance

*Financial targets assume that there will be increases in yen policy interest rates of about 0.25% in both fiscal 2007 and fiscal 2008, that nominal GDP will expand at a rate of more than 2% per annum,
and that the yen will remain around ¥115 per U.S. dollar.

SMFG 2008

SMFG 2008 11

Outline of “LEAD THE VALUE” Plan
— SMFG’s Medium-Term Management Plan

In October 2006, SMFG completed the repayment of public funds,

the added value inherent in these strengths, we are aiming to be a

and, in view of major changes in the economic and competitive

globally competitive financial services group with the highest trust.

environment surrounding the Group, launched a medium-term

Accordingly, we have set the following targets during the cur-

management plan entitled “LEAD THE VALUE” plan covering the

rent medium-term management plan:

three years from fiscal 2007 to fiscal 2009.

In preparing our plan, we reaffirmed that the most important

requirement for achieving sustainable growth is to offer customers

value that exceeds their expectations and leads customers in

directions that help them to create new value. The new plan also

● Aim for top quality in growth business areas,
● Realize solid financial base as a global player, and
● Increase returns to shareholders.

◎ Concept of Strategic Initiatives in the

“LEAD THE VALUE” Plan

and a labor shortage. The magnitude of these changes has

exceeded the assumptions that formed the basis for the previous

management plan. Therefore, to continue our growth in today’s

SMFG has increased profitability by identifying strategic busi-

competitive environment, going forward, we must be sure that we

nesses with strong growth potential at early stages and developed

have an accurate grasp of macroeconomic trends that are likely to

highly productive and efficient proprietary business models to con-

bring opportunities for earning profits and competing both in

solidate its position in these business areas. As a result, the quality

Japan and at the global level. The previous policies of maximizing

of our assets has improved substantially, and net income has

earnings by restructuring and streamlining our operations are no

recovered, enabling us to complete the repayment of public funds

longer likely to be sufficient. Instead, we must make substantial

reconfirms that SMFG’s core strengths are the “Spirit of Innovation,”

To attain these targets, we are focusing on two strategic initia-

in fiscal 2006, about one-and-a-half years earlier than initially

investments aimed at growth from a medium- to long-term per-

“Speed,” and “Solution & Execution,” the drivers behind our ability

tives: namely, strengthening targeted growth business areas and

planned. Overall, we have made steady progress toward enhanc-

spective to lay the foundations for sustainable growth. This is why

to quickly make strategic businesses profitable. By drawing fully on

fortifying platform for supporting sustainable growth.

ing our profitability and strengthening our financial position.

we have identified two key strategic initiatives under our “LEAD

◎ Our Objectives under
the Medium-Term
Management Plan,
“LEAD THE VALUE” Plan

“A Globally Competitive Financial Services Group
with the Highest Trust”

“LEAD THE VALUE” Plan

Spirit of
Innovation

Speed

Solution &
Execution

Our Mission

To provide optimum value added to our customers and together with them achieve growth

To create sustainable shareholder value through business growth

To provide a challenging and professionally rewarding work environment for our dedicated employees

◎ Outline of “LEAD THE VALUE” Plan

“LEAD THE VALUE” Plan

Aim to become “a globally competitive
financial services group with the highest trust” by
making the most of our strengths to LEAD THE VALUE

LEAD the way in
helping customers create
and deliver new VALUE

stren gt h
Our

v a l u e a d d ed (the originsofourcorporate

Spirit of
Innovation

a
l

)

Speed

Solution &
Execution

Fiscal 2007 to Fiscal 2009

Strategic
Initiatives

●Strengthen targeted
growth business areas

“Seven Growth Areas”

●Fortify platform for supporting
sustainable growth

Management Targets

● Aim for top quality in growth business areas

● Realize solid financial base as a global player

● Increase returns to shareholders
(realize payout ratio of more than 20%)

Financial targets for fiscal 2009
(SMFG consolidated)

● Net income: ¥650 billion
● Net income RORA: Approx. 1%
● Tier I ratio: Approx. 8%
● Overhead ratio: 40-45%
(SMBC non-consolidated)

● ROE (SMFG consolidated):10-15%

In parallel with this improvement in performance, however, dra-

THE VALUE” plan: namely, “strengthening targeted growth busi-

matic changes have reshaped our operating environment,

ness areas” and “fortifying platform for supporting sustainable

including more-intense competition in the domestic loan market

growth.”

◎ Strategic Initiatives under the “LEAD THE VALUE” Plan

Five Macrotrends

Tide of
Generational
change

Economic and
financial
globalization

Deregulations
and tightening of
regulations

Expansion of
ubiquitous
network

“Great
Investment Era”

Strengthen Targeted Growth Business Areas: “Seven Growth Areas”

Financial consulting
services for
individuals

Solution providing
for corporations

Focused business
areas in
global markets

Payment &
settlement services,
Consumer finance

Investment banking,
Trust business

Proprietary
investment

Credit derivatives,
Trading &
distribution

Fortify Platform for Supporting Sustainable Growth

Business performance evaluation
system with medium-term
viewpoint

Framework to secure and develop
professionals

Reinforce IT and operational
infrastructure

Improve ALM and risk management,
Strengthen compliance

SMFG 2008

SMFG 2008 11

Business Overview

■ Consumer Banking

The member companies of SMFG are collaborating to enhance

the financial services they provide to consumers. Some of the

key indicators of SMBC’s performance in fiscal 2007, reflecting

the high esteem customers have for our services, include an

outstanding balance of investment trusts under management

of ¥2,974.0 billion; sales of foreign bonds and structured

bonds for the fiscal year under review of ¥127.2 billion; pen-

sion-type insurance sales of ¥389.4 billion; sales of single

premium full-life insurance of ¥51.0 billion; and mortgage loans

outstanding of ¥13,647.8 billion as of March 31, 2008.

Financial Consulting Business
SMBC’s Consumer Banking Unit continued to broaden its

product lineup in fiscal 2007, introducing new investment trusts

and life insurance products. As part of our “total consulting”

services, which offer our cus-

t o m e r s o n e - s t o p

shopping for all types

of financial services,

beginning on December

22, 2007, we expanded

our offering of life insur-

ance products. Specifically,

our insurance consultants,

who have been assigned

to 90 of our branches and have extensive experience in insur-

ance sales, are responsible for selling a total of 18 products

(offered by seven insurance companies, as of May 31, 2008),

including mainly level premium-type death benefit insurance

and medical insurance. Similarly, in our investment trust sales

activities, we are expanding our lineup of products to meet

customer needs. Our lineup of investment trusts includes

funds that invest in the stocks of companies in the emerging

economies of BRICs (Brazil, Russia, India, and China) and

funds that invest in high interest rate foreign currency instru-

ments.

Moreover, accompanying the implementation of Japan’s

Financial Instruments & Exchange Law in September 2007, we

have sharpened our focus on offering investment products that

are appropriate for the level of knowledge and experience of

our customers regarding investments, the amount of their

assets, their views of financial risk, and other aspects.

In addition, prices of stocks and other investment instru-

ments in Japan and overseas are fluctuating substantially as a

result of the subprime loan problem in the United States.

Therefore, to follow up with our customers and provide them

with timely information, we hold customer seminars to report on

asset management performance, issue monthly and special

market reports, and conduct direct mailings.

Mortgage Loan Business
To enable us to respond to the wide-ranging needs of our cus-

tomers, we have engaged in the development of new products,

as well as in the expansion and improvement of the services

we offer. For example, in October 2005, we began to offer a

new type of mortgage loan that provided insurance for repay-

ing the loan balance in the event that one of three major

medical conditions might have

occurred. As of March 31, 2008, the

cumulative amount of this type of

loan origination totaled approxi-

mately ¥660.0 billion.

In January 2008, we enhanced

the convenience of “One’s Direct,”

our Internet banking service, to

enable mortgage loan borrowers to

make advance payments on their

housing loans and to change inter-

est rate terms on a 24-hour basis. These expanded services

thus allow customers to make these changes from their homes

and to select the time to conduct these banking activities that is

most convenient for them.

Also, in April 2008, we introduced mortgage loans with a

special provision that temporarily suspends a portion of loan

repayments following natural disas-

ters. When customers’ homes are

damaged by such disasters, the

amount of loan repayments is

reduced, depending on the extent of

the damage, for a specified period.

This is the first loan of this type in the

banking industry in Japan.

Moreover, SMBC is focusing on

initiatives to deal with environmental

issues by working together with its

customers to contribute to measures to reduce global warming.

In April 2008, for example, the bank began a campaign to pro-

mote its carbon offset mortgage loan.

Settlement and Consumer Finance Business
Through our “SMBC First Pack” service, which offers a platform

for various settlement-related possibilities, we are endeavoring

to raise the level of our services. Beginning in September 2007,

we expanded our point exchange programs with other compa-
nies and added the iD ®
electronic settlement func-

tion of the Mitsui Sumitomo

Card on the SMBC CARD.

The number of sub-

scribers to the Mitsui
Sumitomo Card iD ® elec-
tronic settlement function,

which is based on a strategic alliance with

NTT DoCoMo, Inc., had climbed to about

770,000 persons as of March 31, 2008,

and the number of terminals accepting
payments via the iD ® service that were
installed on the premises of affiliated mer-

chants had expanded to about 300,000.

In the consumer finance business that

began in April 2005 through the collabora-

tion of SMBC, Promise Co., Ltd., and

converted to accept biometric identification. ATMs for visually

challenged persons had been installed in all locations, includ-

ing unmanned ATM only offices.

We are also adjusting our fees depending on the nature of

transactions and expanding the ATM network to broaden

At-Loan Co., Ltd., the number of automatic contract machines

had grown to 697 at the end of March 2008, and the balance

of loans made by SMBC and At-Loan together had expanded

to about ¥350.0 billion.

Transaction Channels
During fiscal 2007, we established new branches in the Tokyo

This ATM is equipped with a phone hand-
to enable visually
set with keys
challenged persons to conduct opera-
tions while listening to directions.

metropolitan area located in Higashi Totsuka (Kanagawa Pre-

access to services that are free of charge. For example, we

fecture), Ichikawa (Chiba Prefecture), and Osaki (Tokyo). In the

revised our ATM fee schedule as of October 2007. Fees for

Kinki region, we opened a new branch in Takarazuka

transactions conducted after banking hours on weekdays were

Nakayama (Hyogo Prefecture).

eliminated for customers using ATMs at the bank’s Head Office

Also, to strengthen our services for customers located in

and branches as well as the bank’s @B NK ATMs in conve-

the Tokai region, which is centered on Aichi Prefecture, we set

nience stores, for those who have savings account balances of

up new branches in the cities of Ikeshita and Issha. In addition,

¥100,000 or more at the time of their transactions. In addition,

in June 2008, we opened a new type of business office,

fees were eliminated for transactions through ATMs of Japan

“SMBC Park Sakae,” which will be the first of SMBC’s offices to

Post Bank and East Japan Railway Company. After-hour fees

concentrate mainly on providing information.

and usage charges were also eliminated for card loans.

We will continue to strengthen our office network in Japan’s

three main geographic areas: namely, the Tokyo metropolitan

area, the Kinki region, and the Tokai region.

Topics

◆ SMBC Retail Banking College Established
On May 7, 2008, SMBC established SMBC Retail Banking Col-
lege (RBC) to train personnel responsible for providing financial
services to individual customers.

RBC offers special training programs aimed at substantially
increasing the sophistication and quality of our consumer bank-
ing services. It has a counter zone that enables trainees to
simulate retail customer consulting, an audio visual room that
broadcasts roll-playing scenarios and enables all trainees
attending to confirm the
content, and other facilities
that speed up their acquisi-
tion of working knowledge
and skills.

On its “One’s Direct” remote banking service, SMBC is

continuing to expand the range of its offerings. Beginning in

May 2007, we began to offer the first foreign currency deposits

with interest rates linked to foreign currency markets, operating

exclusively on the Internet on a 24-hour basis on weekdays.

Also in May 2007, we linked

onto the i-ApliBanking com-

mon mobile banking platform

developed by NTT DoCoMo.

Then in July and August

2007, we strengthened mea-

sures for preventing Internet

“phishing” (short for “pass-

word harvesting fishing”)

fraud by introducing a service that closes phishing sites quickly

and provides the customer with a new type of identification.

The Internet banking services offered by One’s Direct have

been ranked highly and placed number one in Japan for the

sixth consecutive year in the independent rankings published

by Gomez, Inc. As of March 31, 2008, the number of One’s

Direct subscribers was approximately 8.4 million.

During fiscal 2007, all ATMs in our manned branches were

SMFG 2008

SMFG 2008 13

Business Overview

■ Consumer Banking

The member companies of SMFG are collaborating to enhance

the financial services they provide to consumers. Some of the

key indicators of SMBC’s performance in fiscal 2007, reflecting

the high esteem customers have for our services, include an

outstanding balance of investment trusts under management

of ¥2,974.0 billion; sales of foreign bonds and structured

bonds for the fiscal year under review of ¥127.2 billion; pen-

sion-type insurance sales of ¥389.4 billion; sales of single

premium full-life insurance of ¥51.0 billion; and mortgage loans

outstanding of ¥13,647.8 billion as of March 31, 2008.

Financial Consulting Business
SMBC’s Consumer Banking Unit continued to broaden its

product lineup in fiscal 2007, introducing new investment trusts

and life insurance products. As part of our “total consulting”

services, which offer our cus-

t o m e r s o n e - s t o p

shopping for all types

of financial services,

beginning on December

22, 2007, we expanded

our offering of life insur-

ance products. Specifically,

our insurance consultants,

who have been assigned

to 90 of our branches and have extensive experience in insur-

ance sales, are responsible for selling a total of 18 products

(offered by seven insurance companies, as of May 31, 2008),

including mainly level premium-type death benefit insurance

and medical insurance. Similarly, in our investment trust sales

activities, we are expanding our lineup of products to meet

customer needs. Our lineup of investment trusts includes

funds that invest in the stocks of companies in the emerging

economies of BRICs (Brazil, Russia, India, and China) and

funds that invest in high interest rate foreign currency instru-

ments.

Moreover, accompanying the implementation of Japan’s

Financial Instruments & Exchange Law in September 2007, we

have sharpened our focus on offering investment products that

are appropriate for the level of knowledge and experience of

our customers regarding investments, the amount of their

assets, their views of financial risk, and other aspects.

In addition, prices of stocks and other investment instru-

ments in Japan and overseas are fluctuating substantially as a

result of the subprime loan problem in the United States.

Therefore, to follow up with our customers and provide them

with timely information, we hold customer seminars to report on

asset management performance, issue monthly and special

market reports, and conduct direct mailings.

Mortgage Loan Business
To enable us to respond to the wide-ranging needs of our cus-

tomers, we have engaged in the development of new products,

as well as in the expansion and improvement of the services

we offer. For example, in October 2005, we began to offer a

new type of mortgage loan that provided insurance for repay-

ing the loan balance in the event that one of three major

medical conditions might have

occurred. As of March 31, 2008, the

cumulative amount of this type of

loan origination totaled approxi-

mately ¥660.0 billion.

In January 2008, we enhanced

the convenience of “One’s Direct,”

our Internet banking service, to

enable mortgage loan borrowers to

make advance payments on their

housing loans and to change inter-

est rate terms on a 24-hour basis. These expanded services

thus allow customers to make these changes from their homes

and to select the time to conduct these banking activities that is

most convenient for them.

Also, in April 2008, we introduced mortgage loans with a

special provision that temporarily suspends a portion of loan

repayments following natural disas-

ters. When customers’ homes are

damaged by such disasters, the

amount of loan repayments is

reduced, depending on the extent of

the damage, for a specified period.

This is the first loan of this type in the

banking industry in Japan.

Moreover, SMBC is focusing on

initiatives to deal with environmental

issues by working together with its

customers to contribute to measures to reduce global warming.

In April 2008, for example, the bank began a campaign to pro-

mote its carbon offset mortgage loan.

Settlement and Consumer Finance Business
Through our “SMBC First Pack” service, which offers a platform

for various settlement-related possibilities, we are endeavoring

to raise the level of our services. Beginning in September 2007,

we expanded our point exchange programs with other compa-
nies and added the iD ®
electronic settlement func-

tion of the Mitsui Sumitomo

Card on the SMBC CARD.

The number of sub-

scribers to the Mitsui
Sumitomo Card iD ® elec-
tronic settlement function,

which is based on a strategic alliance with

NTT DoCoMo, Inc., had climbed to about

770,000 persons as of March 31, 2008,

and the number of terminals accepting
payments via the iD ® service that were
installed on the premises of affiliated mer-

chants had expanded to about 300,000.

In the consumer finance business that

began in April 2005 through the collabora-

tion of SMBC, Promise Co., Ltd., and

converted to accept biometric identification. ATMs for visually

challenged persons had been installed in all locations, includ-

ing unmanned ATM only offices.

We are also adjusting our fees depending on the nature of

transactions and expanding the ATM network to broaden

At-Loan Co., Ltd., the number of automatic contract machines

had grown to 697 at the end of March 2008, and the balance

of loans made by SMBC and At-Loan together had expanded

to about ¥350.0 billion.

Transaction Channels
During fiscal 2007, we established new branches in the Tokyo

This ATM is equipped with a phone hand-
to enable visually
set with keys
challenged persons to conduct opera-
tions while listening to directions.

metropolitan area located in Higashi Totsuka (Kanagawa Pre-

access to services that are free of charge. For example, we

fecture), Ichikawa (Chiba Prefecture), and Osaki (Tokyo). In the

revised our ATM fee schedule as of October 2007. Fees for

Kinki region, we opened a new branch in Takarazuka

transactions conducted after banking hours on weekdays were

Nakayama (Hyogo Prefecture).

eliminated for customers using ATMs at the bank’s Head Office

Also, to strengthen our services for customers located in

and branches as well as the bank’s @B NK ATMs in conve-

the Tokai region, which is centered on Aichi Prefecture, we set

nience stores, for those who have savings account balances of

up new branches in the cities of Ikeshita and Issha. In addition,

¥100,000 or more at the time of their transactions. In addition,

in June 2008, we opened a new type of business office,

fees were eliminated for transactions through ATMs of Japan

“SMBC Park Sakae,” which will be the first of SMBC’s offices to

Post Bank and East Japan Railway Company. After-hour fees

concentrate mainly on providing information.

and usage charges were also eliminated for card loans.

We will continue to strengthen our office network in Japan’s

three main geographic areas: namely, the Tokyo metropolitan

area, the Kinki region, and the Tokai region.

Topics

On its “One’s Direct” remote banking service, SMBC is

continuing to expand the range of its offerings. Beginning in

May 2007, we began to offer the first foreign currency deposits

with interest rates linked to foreign currency markets, operating

exclusively on the Internet on a 24-hour basis on weekdays.

Also in May 2007, we linked

onto the i-ApliBanking com-

mon mobile banking platform

developed by NTT DoCoMo.

Then in July and August

2007, we strengthened mea-

sures for preventing Internet

“phishing” (short for “pass-

word harvesting fishing”)

fraud by introducing a service that closes phishing sites quickly

and provides the customer with a new type of identification.

The Internet banking services offered by One’s Direct have

been ranked highly and placed number one in Japan for the

sixth consecutive year in the independent rankings published

by Gomez, Inc. As of March 31, 2008, the number of One’s

Direct subscribers was approximately 8.4 million.

During fiscal 2007, all ATMs in our manned branches were

SMFG 2008

SMFG 2008 13

into overseas markets and to companies that are already

in Japan in the field of providing environmental certifications to

Fund-raising

■ Corporate Banking

Reinforcing Capabilities in Response
to Globalization
Japan’s overseas direct investment has continued to expand

tomers to use their equip-

ment assets, such as

machine tools and construc-

tion equipment, as collateral

for borrowings. Also, in April

since 2004. The number of customers among small and

2008, we began to offer

medium-sized enterprises (SMEs) who are expanding and

Asset Value Truck & Bus

deepening their business operations through development of

Loans, which make it possi-

activities in overseas markets, including Asia, is growing.

ble for customers to use

To respond to the needs of these customers to enter over-

their commercial vehicles,

seas markets and expand their existing overseas activities,

such as trucks and buses as

SMBC established its Global Advisory Department in April

loan collateral.

2008, which spans across the three business units responsible

We are also developing

for corporate transactions—Middle Market Banking, Corporate

other types of loans that pro-

Banking, and International Banking Units. The Global Advisory
department is based in Tokyo and has increased the number

vide funds on favorable terms to corporations that have various
qualifications. Beginning in February 2006, for example, we

of personnel stationed in Asia, principally in China, to reinforce

introduced the SMBC-ECO Loans for environmentally con-

its capabilities for gathering information and providing solu-

scious midsized companies and SMEs that have obtained

tions to customer issues.

environmental certifications. Also, beginning in December

Our new advisory department is well positioned to provide

2007, as a follow-up product, we worked together with NPO

even higher quality support for customers considering entry

KES Environmental Organization, the pioneering organization

expanding their activities overseas.

Improving Products and Services for
Midsized Companies and SMEs
To contribute to the development of the business activities of

SMEs, to develop and begin to offer the KES Support Loan,

targeted at companies that have obtained the KES Manage-

ment System Standard certification, which is administered by

the KES Environmental Organization. SMBC-ECO Loans,

including the KES Support Loans, are now widely used by our

midsized companies and SMEs, SMBC proactively takes the

customers and, on a cumulated basis, had exceeded ¥30 bil-

initiative in understanding customers’ needs and issues to be

lion as of May 31, 2008.

addressed and is well prepared to offer proposals for providing

appropriate products and services.

Products and Services for Fund-Raising
Thus far, in the area of unsecured loans, where customers

have strong needs, we were quick to develop our Business

Select Loans, which do not require guarantees by third parties,

and have promoted these loans to SMEs.

In September 2007, in addition to our offerings of unse-

cured loans available to date, we introduced a new lineup of

Wide Support Loans to

respond to customer needs

for funding to develop and

make use of real estate hold-

ings.

Moreover, for SMEs, we

are developing a range of

fund-raising methods that

are based on various types

of assets. For example, in

November 2007, we intro-

duced our Asset Value

Loans, which enable cus-

SMFG 2008

Also, in April 2008, we

added the Certified Com-

pany Support Loans to our

lineup of fund-raising meth-

ods. Companies eligible for

these loans are selected

from among those that have

received (a) certifications

and awards for technology

and management capabili-

ties from national and local

government entities speci-

fied by SMBC and (b) such

certifications and awards

under management qualifi-

cation certification systems

recognized by SMBC. Simi-

larly, in June 2008, we

introduced our Web Report-

ing Loans. Companies

eligible for these loans are

selected from among those

that submit electronic corpo-

rate tax returns and make

use of Web tax reporting

data services. (These are

companies that make use of the Japan national tax authorities

“e-Tax” service that enables them to transmit their tax return
data and certificates of tax payment electronically to the bank.)

Customer Needs

SMBC Products and Services

Unsecured
loans

Asset-based
financing

Business Select Loans

Wide Support Loans
Asset Value: Equipment Asset-Based
Asset Value: Truck & Bus

Qualification-
based
financing

SMBC-ECO Loans (KES Support Loans)
Certified Company Support Loans
Web Reporting Loans

Provision of
information

Value-added
services

Complimentary information services
Business Information Service
・ Management Topics
・ Columns
・ Business Knowledge
・ Book Reviews

Assistance for entering
overseas market and
trading transactions

Trade Consultants

Information Services
In addition to these financing services, in September 2007,

SMBC expanded its complimentary Business Information Ser-

vice, which it inaugurated in November 2006. The upgrading of

this service aimed to “transmit additional content” and “provide

weekly updates” and the number of companies receiving the

service has increased to more than 10,000.

Also, beginning in February 2008, the bank formed a

group of 18 Trade Consultants, who are drawn from among

persons thoroughly familiar with trade transactions and with

extensive experience in trading companies. These consultants

offer advisory services to customers engaged in trade transac-

tions, including information on conditions in overseas markets

and points for special attention when conducting export and

import business.

SMBC intends to continue to offer value-added services to

its customers that go beyond providing financing products.

national trade, SMBC is working to offer new products and ser-

vices to assist them.

As a tool to increase the efficiency of foreign trade transac-

tions for corporations conducting foreign exchange

transactions with overseas customers, SMBC offers its Global

e-Trade Service, an Internet-based foreign exchange service.

Beginning in May 2008, to provide a dedicated remittance ser-

vice, which is in demand among customers, we introduced a

lower cost Global e-Trade Service Debut Type, which is avail-

able for a monthly fee of ¥2,100.

Customer

SMBC

Global e-Trade Service
Debut Type

・ Outgoing remittance

transactions to overseas
recipients

・Handling of incoming

remittance transactions

・ Notice of statements and

detailed transaction reports

・ Print-out function

Value
Door
entrance
portal

Overseas
banks

In addition, with the objective of providing global support

for domestic companies with technological capabilities in the

environmental area, beginning in March 2008, SMBC intro-

duced a service system that offers preferential trade related

fees and interest rates to customers who have cleared our

environmental technical standards based on the know-how of

Group company JRI.

SMBC will continue to actively support the activities of its

customers among midsized companies and SMEs to globalize

their operations.

Topics

◆ SMBC Provides Support for Joint Research on
Businesses Related to the Natural Environment
In June 2008, SMBC made a grant to support joint
research on environmental business to be conducted by
Annex Co., Ltd.—a company that won the SMBC Award in
the SMBC-sponsored “eco japan cup” contest for business
activities related to the natural environment—and the Incu-
bation Center of Japan’s
Keio University.

SMBC plans to con-
tinue providing support for
the further development of
environmental businesses.

Foreign Exchange Products and Services
As midsized companies and SMEs continue to globalize their

activities by entering overseas markets and conducting inter-

Examples of the “5 x Green” Greening
Units promoted by Annex. (Installed in
Marunouchi, Chiyoda-ku, Tokyo)

SMFG 2008 15

into overseas markets and to companies that are already

in Japan in the field of providing environmental certifications to

Fund-raising

■ Corporate Banking

Reinforcing Capabilities in Response
to Globalization
Japan’s overseas direct investment has continued to expand

tomers to use their equip-

ment assets, such as

machine tools and construc-

tion equipment, as collateral

for borrowings. Also, in April

since 2004. The number of customers among small and

2008, we began to offer

medium-sized enterprises (SMEs) who are expanding and

Asset Value Truck & Bus

deepening their business operations through development of

Loans, which make it possi-

activities in overseas markets, including Asia, is growing.

ble for customers to use

To respond to the needs of these customers to enter over-

their commercial vehicles,

seas markets and expand their existing overseas activities,

such as trucks and buses as

SMBC established its Global Advisory Department in April

loan collateral.

2008, which spans across the three business units responsible

We are also developing

for corporate transactions—Middle Market Banking, Corporate

other types of loans that pro-

Banking, and International Banking Units. The Global Advisory
department is based in Tokyo and has increased the number

vide funds on favorable terms to corporations that have various
qualifications. Beginning in February 2006, for example, we

of personnel stationed in Asia, principally in China, to reinforce

introduced the SMBC-ECO Loans for environmentally con-

its capabilities for gathering information and providing solu-

scious midsized companies and SMEs that have obtained

tions to customer issues.

environmental certifications. Also, beginning in December

Our new advisory department is well positioned to provide

2007, as a follow-up product, we worked together with NPO

even higher quality support for customers considering entry

KES Environmental Organization, the pioneering organization

expanding their activities overseas.

Improving Products and Services for
Midsized Companies and SMEs
To contribute to the development of the business activities of

SMEs, to develop and begin to offer the KES Support Loan,

targeted at companies that have obtained the KES Manage-

ment System Standard certification, which is administered by

the KES Environmental Organization. SMBC-ECO Loans,

including the KES Support Loans, are now widely used by our

midsized companies and SMEs, SMBC proactively takes the

customers and, on a cumulated basis, had exceeded ¥30 bil-

initiative in understanding customers’ needs and issues to be

lion as of May 31, 2008.

addressed and is well prepared to offer proposals for providing

appropriate products and services.

Products and Services for Fund-Raising
Thus far, in the area of unsecured loans, where customers

have strong needs, we were quick to develop our Business

Select Loans, which do not require guarantees by third parties,

and have promoted these loans to SMEs.

In September 2007, in addition to our offerings of unse-

cured loans available to date, we introduced a new lineup of

Wide Support Loans to

respond to customer needs

for funding to develop and

make use of real estate hold-

ings.

Moreover, for SMEs, we

are developing a range of

fund-raising methods that

are based on various types

of assets. For example, in

November 2007, we intro-

duced our Asset Value

Loans, which enable cus-

SMFG 2008

Also, in April 2008, we

added the Certified Com-

pany Support Loans to our

lineup of fund-raising meth-

ods. Companies eligible for

these loans are selected

from among those that have

received (a) certifications

and awards for technology

and management capabili-

ties from national and local

government entities speci-

fied by SMBC and (b) such

certifications and awards

under management qualifi-

cation certification systems

recognized by SMBC. Simi-

larly, in June 2008, we

introduced our Web Report-

ing Loans. Companies

eligible for these loans are

selected from among those

that submit electronic corpo-

rate tax returns and make

use of Web tax reporting

data services. (These are

companies that make use of the Japan national tax authorities

“e-Tax” service that enables them to transmit their tax return
data and certificates of tax payment electronically to the bank.)

Customer Needs

SMBC Products and Services

Unsecured
loans

Asset-based
financing

Business Select Loans

Wide Support Loans
Asset Value: Equipment Asset-Based
Asset Value: Truck & Bus

Qualification-
based
financing

SMBC-ECO Loans (KES Support Loans)
Certified Company Support Loans
Web Reporting Loans

Provision of
information

Value-added
services

Complimentary information services
Business Information Service
・ Management Topics
・ Columns
・ Business Knowledge
・ Book Reviews

Assistance for entering
overseas market and
trading transactions

Trade Consultants

Information Services
In addition to these financing services, in September 2007,

SMBC expanded its complimentary Business Information Ser-

vice, which it inaugurated in November 2006. The upgrading of

this service aimed to “transmit additional content” and “provide

weekly updates” and the number of companies receiving the

service has increased to more than 10,000.

Also, beginning in February 2008, the bank formed a

group of 18 Trade Consultants, who are drawn from among

persons thoroughly familiar with trade transactions and with

extensive experience in trading companies. These consultants

offer advisory services to customers engaged in trade transac-

tions, including information on conditions in overseas markets

and points for special attention when conducting export and

import business.

SMBC intends to continue to offer value-added services to

its customers that go beyond providing financing products.

national trade, SMBC is working to offer new products and ser-

vices to assist them.

As a tool to increase the efficiency of foreign trade transac-

tions for corporations conducting foreign exchange

transactions with overseas customers, SMBC offers its Global

e-Trade Service, an Internet-based foreign exchange service.

Beginning in May 2008, to provide a dedicated remittance ser-

vice, which is in demand among customers, we introduced a

lower cost Global e-Trade Service Debut Type, which is avail-

able for a monthly fee of ¥2,100.

Customer

SMBC

Global e-Trade Service
Debut Type

・ Outgoing remittance

transactions to overseas
recipients

・Handling of incoming

remittance transactions

・ Notice of statements and

detailed transaction reports

・ Print-out function

Value
Door
entrance
portal

Overseas
banks

In addition, with the objective of providing global support

for domestic companies with technological capabilities in the

environmental area, beginning in March 2008, SMBC intro-

duced a service system that offers preferential trade related

fees and interest rates to customers who have cleared our

environmental technical standards based on the know-how of

Group company JRI.

SMBC will continue to actively support the activities of its

customers among midsized companies and SMEs to globalize

their operations.

Topics

SMBC plans to con-
tinue providing support for
the further development of
environmental businesses.

Foreign Exchange Products and Services
As midsized companies and SMEs continue to globalize their

activities by entering overseas markets and conducting inter-

Examples of the “5 x Green” Greening
Units promoted by Annex. (Installed in
Marunouchi, Chiyoda-ku, Tokyo)

SMFG 2008 15

■ Services for High-Net-Worth

Individuals, Business Owners
and Employees

Private Advisory Department
SMBC’s Private Advisory Department responds to the diverse

requirements of business owners and high-net-worth individu-

als. The activities of the department span three areas. The first

is providing private banking services that include the prepara-

tion of comprehensive proposals for the management of

monetary assets that answer to customer needs. The second

is preparing carefully tailored proposals for business succes-

sion, based on the know-how the bank has accumulated from

long experience in this area and the input of outside special-
ists. The third is workplace banking services that give

proposals include specific management suggestions for vari-

ous categories of customer assets.

Proposal Preparation and Implementation

1. Profiling

Sharing thoughts with customers
and proposals for customers’
overall asset portfolios

2. Consulting

Proposals for asset allocation for
customers’ monetary asset
portfolios

4. Review

Reporting and reviewing on asset
management results

3. Action

Specific proposals for the
management of various asset
categories

Support for Business Succession
We offer tailor-made proposals to our customers who have

assistance in formulating and implementing employee benefit

concerns about passing on their businesses in the years

■ Investment Banking

Accomplishments in Fiscal 2007
SMBC won first place in the league table for mandated

arrangers of Japanese syndicated loans in fiscal 2007, draw-

ing on its strong placement capabilities and through its

aggressive initiatives to capture major deals. Also, on a global

basis, SMBC received a high rating from market participants

for arranging a large number of project finance deals, receiv-

ing “Deal of the Year” awards from major magazines. In

addition, in the field of ship financing, on a global basis, SMBC

has placed within the top 10 arrangers for the second consec-

utive year. We also improved our capabilities and support

services for potential growth companies through direct equity

investments, implemented aggressive initiatives to develop our
hybrid finance instruments to respond to the diverse needs of

our customers, and expanded into the carbon credit business

programs for supporting employees’ lifelong financial plans,

ahead. We prepare these proposals and plans with reference

and other new business fields.

including asset formation savings, housing finance, and

to the particular situation and requirements of individual cus-

defined contribution pension plans.

tomers to assist them in implementing business succession

In providing these three types of services, the department

smoothly and with an eye to further business development.

works to meet the requirements of business owners, employees,

and high-net-worth customers, by providing responsive services

through the bank’s domestic branches and by working closely

with SMFG companies and alliance partners.

Head of families

Customers
High-net-worth-Individuals

Business Owners

SMBC

Officers in charge of customers at
bank branches

Officers in charge of customers in
the Middle Market Banking Unit

Relationship management

・Asset management
requirements
・Employee benefit
programs, etc.

Private Advisory Department

・Business
succession
needs

・Asset succession/
inheritance requirements

・Provision of advice for
expanding business
operations and
other various needs

Business
strategy

Capital policy

Asset
succession

Consideration of
M&A/MBO
possibilities

Our
Solutions

Organizational
realignments

Arrangements for
tax payments

Stock price
simulations

Policies vis-à-vis
successors

Workplace Banking
We also promote transactions with the employees of corporate

clients and support the creation of employee benefit programs.

In April 2006, SMBC formed a Defined Contribution Depart-

Other related
departments

Group companies

SMFG

ment, which is responsible for

offering operating services for

Affiliated tax accountants

defined benefit plans.

Private Banking
In its private banking services, SMBC discusses and shares

thoughts with customers regarding their own assets and,

based on these discussions, in cooperation with others inside

and outside the bank, offers proposals for the allocation of

assets as well as for assisting customers in expanding their

business activities, arranging for business and asset succes-

sion, and managing their overall asset portfolios. These

SMFG 2008

Collaboration with Daiwa Securities SMBC
Daiwa Securities SMBC Co., Ltd., ranked first in the league

table for All Bonds in Yen in fiscal 2007 and placed second in

the league table for bookrunners for initial public offerings. In

addition, reflecting the highly favorable esteem that it has

received from market participants, Daiwa Securities SMBC

won the “Samurai Bond House of the Year” and the “Asset-

backed Securities House of the Year” awards presented by the

U.S. research company Thomson Financial. In the M&A advi-

sory field, Daiwa Securities SMBC executed a business

alliance agreement with U.S. M&A specialist Sagent Advisors

Inc. and is expected to respond proactively to expanding

cross-border M&A deals.

Syndicate Loan League Table*

Fiscal 2007
Mandated Arrangers

1. SMBC

2. Mizuho Financial Group

3. Mitsubishi UFJ Financial Group

4. Citigroup

5. Sumitomo Trust & Banking

Amount
(¥ billion)

8,048.4

7,585.9

5,881.4

953.4

396.5

Project Finance
2007 Deal of the Year Awards—Principal Deals

Award category
Region/industry

Deal name
(Country/sector)

Amount syndicated
US$ million

Magazine presenting
award

Global

Barka 2 & Al-Rusail
(Oman/IWPP)

937

Project Finance Magazine

Africa/mining

Middle East/
manufacturing

Asia-Pacific/
electric power

Ambatovy
(Madagascar/
nickel mining)

Emirates Aluminum
(Abu Dhabi/
aluminum smelting)

Crimson Power
(Philippines/acquisition
of an independent
power producer (IPP))

2,100

4,400

Project Finance Magazine
Project Finance International

2,900

Project Finance Magazine

All Bonds in Yen Bookrunner League Table*

Amount
(¥ billion)

3,975.0

3,532.9

3,501.8

3,384.9

3,275.4

Fiscal 2007
Bookrunners

1. Daiwa Securities SMBC

2. Mizuho Financial Group

3. Nomura

4. Mitsubishi UFJ Financial Group

5. Nikko Citigroup

* Source: Thomson Financial

Topics

◆ Syndicated Loans
SMBC ranked first in the
league table for mandated
arrangers of Japanese
syndicated loans in fiscal
2007 and was selected
the “Best arranger of
loans for Japanese bor-
rowers” by Euroweek
magazine, the UK based
financial journal.

◆ Environmental Business
In October 2007, SMBC established its Environmental
Products Department with the mission of promoting envi-
ronmental business, including carbon credit business.
Also, in connection with clean development mechanism
(CDM) projects in Brazil, SMBC was the only Japanese
bank nominated for the
“Sustainable Banking
Award 2007” presented
by the Financial Times
and International Finance
Corporation.

CDM project in Brazil
(Arapucel small hydroelectric
power plant)

SMFG 2008 17

■ Services for High-Net-Worth

Individuals, Business Owners
and Employees

Private Advisory Department
SMBC’s Private Advisory Department responds to the diverse

requirements of business owners and high-net-worth individu-

als. The activities of the department span three areas. The first

is providing private banking services that include the prepara-

tion of comprehensive proposals for the management of

monetary assets that answer to customer needs. The second

is preparing carefully tailored proposals for business succes-

sion, based on the know-how the bank has accumulated from

long experience in this area and the input of outside special-
ists. The third is workplace banking services that give

proposals include specific management suggestions for vari-

ous categories of customer assets.

Proposal Preparation and Implementation

1. Profiling

Sharing thoughts with customers
and proposals for customers’
overall asset portfolios

2. Consulting

Proposals for asset allocation for
customers’ monetary asset
portfolios

4. Review

Reporting and reviewing on asset
management results

3. Action

Specific proposals for the
management of various asset
categories

Support for Business Succession
We offer tailor-made proposals to our customers who have

assistance in formulating and implementing employee benefit

concerns about passing on their businesses in the years

■ Investment Banking

Accomplishments in Fiscal 2007
SMBC won first place in the league table for mandated

arrangers of Japanese syndicated loans in fiscal 2007, draw-

ing on its strong placement capabilities and through its

aggressive initiatives to capture major deals. Also, on a global

basis, SMBC received a high rating from market participants

for arranging a large number of project finance deals, receiv-

ing “Deal of the Year” awards from major magazines. In

addition, in the field of ship financing, on a global basis, SMBC

has placed within the top 10 arrangers for the second consec-

utive year. We also improved our capabilities and support

services for potential growth companies through direct equity

investments, implemented aggressive initiatives to develop our
hybrid finance instruments to respond to the diverse needs of

our customers, and expanded into the carbon credit business

programs for supporting employees’ lifelong financial plans,

ahead. We prepare these proposals and plans with reference

and other new business fields.

including asset formation savings, housing finance, and

to the particular situation and requirements of individual cus-

defined contribution pension plans.

tomers to assist them in implementing business succession

In providing these three types of services, the department

smoothly and with an eye to further business development.

works to meet the requirements of business owners, employees,

and high-net-worth customers, by providing responsive services

through the bank’s domestic branches and by working closely

with SMFG companies and alliance partners.

Head of families

Customers
High-net-worth-Individuals

Business Owners

SMBC

Officers in charge of customers at
bank branches

Officers in charge of customers in
the Middle Market Banking Unit

Relationship management

・Asset management
requirements
・Employee benefit
programs, etc.

Private Advisory Department

・Business
succession
needs

・Asset succession/
inheritance requirements

・Provision of advice for
expanding business
operations and
other various needs

Business
strategy

Capital policy

Asset
succession

Consideration of
M&A/MBO
possibilities

Our
Solutions

Organizational
realignments

Arrangements for
tax payments

Stock price
simulations

Policies vis-à-vis
successors

Workplace Banking
We also promote transactions with the employees of corporate

clients and support the creation of employee benefit programs.

In April 2006, SMBC formed a Defined Contribution Depart-

Other related
departments

Group companies

SMFG

ment, which is responsible for

offering operating services for

Affiliated tax accountants

defined benefit plans.

Private Banking
In its private banking services, SMBC discusses and shares

thoughts with customers regarding their own assets and,

based on these discussions, in cooperation with others inside

and outside the bank, offers proposals for the allocation of

assets as well as for assisting customers in expanding their

business activities, arranging for business and asset succes-

sion, and managing their overall asset portfolios. These

SMFG 2008

Collaboration with Daiwa Securities SMBC
Daiwa Securities SMBC Co., Ltd., ranked first in the league

table for All Bonds in Yen in fiscal 2007 and placed second in

the league table for bookrunners for initial public offerings. In

addition, reflecting the highly favorable esteem that it has

received from market participants, Daiwa Securities SMBC

won the “Samurai Bond House of the Year” and the “Asset-

backed Securities House of the Year” awards presented by the

U.S. research company Thomson Financial. In the M&A advi-

sory field, Daiwa Securities SMBC executed a business

alliance agreement with U.S. M&A specialist Sagent Advisors

Inc. and is expected to respond proactively to expanding

cross-border M&A deals.

Syndicate Loan League Table*

Fiscal 2007
Mandated Arrangers

1. SMBC

2. Mizuho Financial Group

3. Mitsubishi UFJ Financial Group

4. Citigroup

5. Sumitomo Trust & Banking

Amount
(¥ billion)

8,048.4

7,585.9

5,881.4

953.4

396.5

Project Finance
2007 Deal of the Year Awards—Principal Deals

Award category
Region/industry

Deal name
(Country/sector)

Amount syndicated
US$ million

Magazine presenting
award

Global

Barka 2 & Al-Rusail
(Oman/IWPP)

937

Project Finance Magazine

Africa/mining

Middle East/
manufacturing

Asia-Pacific/
electric power

Ambatovy
(Madagascar/
nickel mining)

Emirates Aluminum
(Abu Dhabi/
aluminum smelting)

Crimson Power
(Philippines/acquisition
of an independent
power producer (IPP))

2,100

4,400

Project Finance Magazine
Project Finance International

2,900

Project Finance Magazine

All Bonds in Yen Bookrunner League Table*

Amount
(¥ billion)

3,975.0

3,532.9

3,501.8

3,384.9

3,275.4

Fiscal 2007
Bookrunners

1. Daiwa Securities SMBC

2. Mizuho Financial Group

3. Nomura

4. Mitsubishi UFJ Financial Group

5. Nikko Citigroup

* Source: Thomson Financial

Topics

CDM project in Brazil
(Arapucel small hydroelectric
power plant)

SMFG 2008 17

■ International Banking

are implementing initiatives flexibly and proactively.

In its international banking operations, which emanate from
SMBC’s International Banking Unit, SMFG offers various ser-
vices to customers operating globally, including corporations,
financial institutions, sovereign governments, and public entities.

Offering Tailor-Made Services for
Regional Requirements through
Our Extensive Overseas Network
To reinforce our transaction capabilities in the fast-growing Asia
and Oceania regions, in April 2008, we established a regional
head office for these regions in Singapore. Also, to strengthen
our abilities for responding appropriately to the needs of differ-
ing markets in the three principal geographical areas of Europe,
the Americas, and Asia, we created four regional management
centers, one each for Europe, the Americas, China, and the rest
of Asia/Oceania. Through this operating structure, under which
we will draw on the capabilities not only of SMBC’s network but
also the abilities of other Group companies, overseas sub-
sidiaries, and our alliance partners among local banking
institutions, we are aiming to offer cutting-edge information and
services at all times in increasingly competitive international
markets as well as optimal solutions to issues our customers
confront in various parts of the world.

Developing Our Activities in Newly Emerging
and Growth Markets
We are working to strengthen our capabilities for responding to
customer needs not only in Europe and the countries of Asia
but also in the newly emerging and growth markets, including
those of the Middle East, Central and Eastern Europe, and
Latin America. We are striving to provide optimal services that
meet the special requirements of individual markets, and, while
remaining aware of changes in the operating environment, we

Topics

◆ Strengthening Our Network
In April 2008, we newly opened representative offices in Ams-
terdam and Prague. These new offices will provide us with a
presence in the Netherlands, where a large number of Japan-
ese companies have set up operations, and in Central and
Eastern Europe, where in recent years a substantial number of
Japanese companies have established business operations.
We will rely on these representative offices to reinforce our
capabilities for gathering information to support our Japanese
customers in the three Benelux nations and the countries of
Central and Eastern Europe. Also, after becoming the first
Japanese bank to establish a branch in Dubai, which is now
the base for our business activities in the Middle East, in March
2007, we became the first Japanese bank to open a represen-
tative office in Doha in April 2008. Similarly, in China, following
the establishment of sub-branch in the Binhai New Area of

Providing Competitive Financial Products
Fourteen of the major financing projects that SMBC has under-
taken received deal of the year awards from the three leading
trade-related magazines: namely, Trade Finance, Global Trade
Review, and Trade & Forfaiting Review. Leveraging the arrang-
ing and structuring capabilities of our Global Trade Finance
Department, which derive from that department’s global activi-
ties, we plan to offer a diversity of products going forward to
provide support for the foreign trade operations of our cus-
tomers. In addition, drawing on the strengths of our network
spanning Asia/Oceania, Europe, the Middle East, and the Amer-
icas, we have attained a top-ranking position in project finance,
including private finance initiative (PFI), public private partner-
ship (PPP), and other types of arrangements in a number of key
industries, including electric power, oil and gas, and petrochem-
icals. Looking ahead, we intend to continue to respond to the
diverse needs of our customers as a top-tier bank.

International Cash Management Services (CMS)
In October 2007, SMBC formed its Global Transaction Banking
Dept. and stationed staff members in Singapore, Shanghai,
New York, and London to create a global system that can
respond to the needs of corporate clients for international cash
management. According to the results of a survey conducted
in 2007 by ASIAMONEY, a magazine specializing in Asian
finance, SMBC ranked third among all banks surveyed and
number one among Japanese banks in the rankings for “Best
Electronic Banking Platform.” Going forward, we will work to
provide the most up-to-date services and information related to
overseas cash management, drawing on our global network.

Continuing Portfolio Optimization
We are working to continuing to increase our asset efficiency

Tianjin in March 2007 and another sub-branch in an industrial
park in the city of Suzhou in April 2007, we opened our Beijing
Branch in February 2008, thus bringing our network in China to
11 offices. Going forward, we plan to further strategically rein-
force our overseas network.

◆ Appointments of National Staff

at Overseas Offices

During fiscal 2007, SMBC appointed local staff officers (general
managers for marketing) as directors, one each in the Americas
and in Europe. In fiscal 2008, another national staff member in
charge of marketing to Greater China (including non-Japanese
customers located in mainland China, including Hong Kong,
and the Taiwan economic region) was appointed as director.
Looking ahead, we intend to actively appoint highly qualified
personnel, regardless of nationality, to such positions and
thereby create a management system that can respond flexibly
to the special features of regional markets.

within the framework of the Basel II requirements by taking
account of the various types of market risk in our international
business activities, managing our portfolio appropriately, and
responding quickly and flexibly to changes in the operating
environment.

Reinforcing Compliance Systems
We are fully aware that expanding our business operations on
a global scale will necessitate the further strengthening of our
compliance systems. Accordingly, we formed an International
Compliance Department within our General Affairs Department
and have newly appointed Head Office Compliance Officers
who are stationed at our overseas offices and report to the
Head Office. These officers have the roles of providing guid-
ance and conducting surveillance activities relating to
compliance at overseas offices and improving compliance
monitoring. Moreover, we are taking steps to substantially rein-
force our anti-money laundering systems since preventing
such activities has become a high-priority issue internationally.

We intend to continue working to capture business opportuni-
ties in the vast markets that characterize international business
activities and aim to become a global commercial bank with
particular strengths in Japan and the rest of Asia.

■ Treasury Markets

SMFG, through the Treasury Unit of SMBC, aims to offer
increasingly higher-value-added services to meet the ever
more sophisticated and diverse needs of its customers for
transactions in the money, foreign exchange, bond and deriva-
tives markets.

To maintain and further strengthen profitability, as it man-
ages risk appropriately, the Treasury Unit focuses on three
goals: (a) expanding transactions volume from its customers:
(b) strengthening its asset-liability management (ALM) system
and trading skills: and (c) diversifying fund management tech-
niques and conducting sharply focused portfolio management.

Enhancing Customer Convenience
In fiscal 2007, the Treasury Unit, working in collaboration with
the business units, took steps to expand its market transac-
tions services system for corporate and retail customers. We
also worked to increase the range of functions offered through
i-Deal, a system that allows customers to conclude foreign
exchange contracts over the Internet.

Looking forward, the Treasury Unit will continue working to
fulfill all our customers’ market transaction needs by providing
full support services of the highest quality in the industry.

ALM and Trading Operations
Through its ALM and trading operations, the Treasury Unit
endeavors to maximize profitability, as it controls market and

liquidity risks, by diversifying management techniques to
include alternative investments, diversifying its investment port-
folio, and taking advantage of arbitrage investment
opportunities.

We will continue to work to secure stable profits by pursu-
ing the optimal allocation of capital appropriate to the level of
risk exposure.

Customers

Corporate business offices,
branches

Treasury Unit

Treasury Marketing Dept.

Planning Dept.

Enhance customer convenience by
improving our services

Planning, research

Transactions with customers

Customer order flow

Trading Dept.

Maintenance of efficient
operations based on
order-initiated trades and
ALM hedging

Foreign exchange
transactions

Derivative
transactions

Bond transactions

CD,
CP transactions

Trading

ALM
operations

Treasury Dept.

Deposits

International
Treasury Dept.

Precise ALM
operations and
liquidity
management

Loans

Bond
investments

Alternative
investments

ALM

Fund and
bond transactions

Interbank Market

Topics

◆ Expanding Services to Meet Customer Needs
To further increase convenience for customers, SMBC con-
tinues to enhance the functions of its i-Deal system that
allows customers to conclude foreign exchange contracts
over the Internet.

In fiscal 2007, as a result of the upgrading of system
functions, individual customers are now able to conduct for-
eign currency deposit transactions on a 24-hour basis on
weekdays using real-time exchange rates via One’s Direct.

◆ Diversification of Investments and Efficient Use

of ALM

SMBC has upgraded its systems to allow for the flexible
expansion and selection of the range of investments by
centralizing interest rate, equity, and alternative invest-
ments in one department while also expanding the number
of personnel engaged in making own-account investments
at overseas offices. In addition, the bank is positioned to
conduct appropriate ALM operations in response to
changing market conditions.

SMFG 2008

SMFG 2008 19

■ International Banking

are implementing initiatives flexibly and proactively.

Topics

Continuing Portfolio Optimization
We are working to continuing to increase our asset efficiency

◆ Appointments of National Staff

at Overseas Offices

■ Treasury Markets

Looking forward, the Treasury Unit will continue working to
fulfill all our customers’ market transaction needs by providing
full support services of the highest quality in the industry.

ALM and Trading Operations
Through its ALM and trading operations, the Treasury Unit
endeavors to maximize profitability, as it controls market and

liquidity risks, by diversifying management techniques to
include alternative investments, diversifying its investment port-
folio, and taking advantage of arbitrage investment
opportunities.

We will continue to work to secure stable profits by pursu-
ing the optimal allocation of capital appropriate to the level of
risk exposure.

Customers

Corporate business offices,
branches

Treasury Unit

Treasury Marketing Dept.

Planning Dept.

Enhance customer convenience by
improving our services

Planning, research

Transactions with customers

Customer order flow

Trading Dept.

Maintenance of efficient
operations based on
order-initiated trades and
ALM hedging

Foreign exchange
transactions

Derivative
transactions

Bond transactions

CD,
CP transactions

Trading

ALM
operations

Treasury Dept.

Deposits

International
Treasury Dept.

Precise ALM
operations and
liquidity
management

Loans

Bond
investments

Alternative
investments

ALM

Fund and
bond transactions

Interbank Market

Topics

◆ Diversification of Investments and Efficient Use

of ALM

SMFG 2008

SMFG 2008 19

www.smfg.co.jp

www.smfl.co.jp

Group Companies (as of March 31, 2008)

The companies of the Sumitomo Mitsui Financial Group (SMFG) offer
a diverse range of financial services, centered on banking opera-
tions, and including credit card services, leasing, information
services, and securities.

Company Name:
Business Description:

Our Mission

● To provide optimum added value to our customers and

together with them achieve growth

● To create sustainable shareholder value through busi-

ness growth

● To provide a challenging and professionally rewarding

work environment for our dedicated employees

Sumitomo Mitsui Financial Group, Inc.
Management of banking subsidiaries (under the
stipulations of Japan’s Banking Law) and of non-
bank subsidiaries as well as performance of ancil-
lary functions
December 2, 2002
1-2, Yurakucho 1-chome, Chiyoda-ku, Tokyo, Japan

Establishment:
Head Office:
Chairman of the Board: Masayuki Oku (Concurrent President at Sumitomo

President:

Capital:
Stock Exchange Listings: Tokyo Stock Exchange (First Section)

Mitsui Banking Corporation)
Teisuke Kitayama (Concurrent Chairman of the
Board of Directors at Sumitomo Mitsui Banking
Corporation)
¥1,420.9 billion

Osaka Securities Exchange (First Section)
Nagoya Stock Exchange (First Section)

SUMITOMO MITSUI Banking Corporation

www.smbc.co.jp

Sumitomo Mitsui Banking Corporation (SMBC)
was established in April 2001 through the
merger of two leading banks: The Sakura Bank,
Limited, and The Sumitomo Bank, Limited.
Sumitomo Mitsui Financial Group, Inc., was
established through a stock transfer as a hold-
ing company, and SMBC became a wholly
owned subsidiary of SMFG. SMBC’s competi-
tive advantages include a strong customer
base, the quick implementation of strategies,
and an extensive lineup of financial products
and services that leverage the expertise of
strategic Group companies in specialized
areas. SMBC, as a core member of SMFG,
works together with other members of the
Group to offer customers highly sophisticated,
comprehensive financial services.

As the pioneer in the issuance of the VISA Card
in Japan and a leader in the domestic credit
card industry, Sumitomo Mitsui Card Company,
Limited, enjoys the strong support of its many
customers and plays a major role as one of the
strategic businesses of SMFG.

Leveraging its strong brand image and its
excellent capabilities across a wide range of
card-related services, the company provides
settlement and financing services focused
around providing credit services that meet cus-
tomer needs. Through its credit card business
operations, the company aims to actively con-

Company Name: Sumitomo Mitsui Banking Corporation
Business Profile: Banking
Establishment: June 6, 1996
Head Office: 1-2, Yurakucho 1-chome, Chiyoda-ku,

Tokyo, Japan

Credit Ratings (as of June 30, 2008)

President & CEO: Masayuki Oku
Number of Employees: 17,886
Number of branches and other business locations:

In Japan:

Branches:

1,489*
473

(Including 38 specialized deposit account branches)

Subbranches:
Agency:
Offices handling

non-banking business:
Automated service centers:
Overseas:
Branches:
Subbranches:
Representative offices:

157
1

20
838
40 locations
19
6
15

* The number of domestic branches excludes ATMs located in

retail convenience stores.

Moody’s
Standard & Poor’s
Fitch Ratings
R&I
JCR

Long-term
Aa2
A+
A+
A+
AA −

Short-term
P−1
A−1
F1
a −1
J −1+

Financial Information (Consolidated basis, years ended March 31)

Billions of yen

2008

2007

2006

2005

For the Year:
Ordinary income ¥ 3,411.0 ¥ 2,925.6 ¥ 2,750.2 ¥ 2,691.3
Ordinary income (loss)

716.6

734.9

862.0

(99.7)

Net income (loss)

351.8

401.7

563.5

(278.9)

At Year-End:

Net assets

Total assets

¥ 5,080.7 ¥ 5,412.4 ¥ 3,598.2 ¥ 2,633.9

108,637.7

98,570.6 104,418.5

97,478.3

www.smbc-card.com

tribute to the realization of comfortable and
affluent consumer lifestyles and make further
dramatic advances as a leading brand in its
industry sector.

Company Name: Sumitomo Mitsui Card Company,

JCR

Long-term
A+

Short-term
J −1+

Credit Ratings (as of July 31, 2007)

Limited

Business Profile: Credit card services
Establishment: December 26, 1967
Head Office:

Tokyo Head Office: 1-2-20, Kaigan, Minato-ku, Tokyo
Osaka Head Office: 4-5-15, Imabashi, Chuo-ku, Osaka

President & CEO: Koichi Tsukihara
Number of Employees: 1,989

Financial Information (Years ended March 31)

Billions of yen

2008

2007

2006

2005

For the Year:

Revenue from
credit card operations ¥5,375.2 ¥4,753.8 ¥4,181.3 ¥3,598.7
Operating revenue
132.1

148.2

157.6

168.4

Operating profit

16.9

14.1

25.8

23.1

At Year-End:

Number of cardholders
(in thousands)

1,640.6 1,495.1

1,406.7 1,346.2

Sumitomo Mitsui Finance and Leasing (SMFL)
was created from the merger of SMBC Leasing
Company, Limited, and Sumisho Lease Co.,
Ltd., in October 2007. SMFL aims to become
the top leasing company in Japan in terms of
both quantity and quality by combining (a) the
customer base and know-how of SMBC Leas-
ing, as a bank-affiliated leasing company that
can draw on the financial solutions offered by
other subsidiaries of SMFG, and (b) the cus-
tomer base and know-how of Sumisho Lease,
as an affiliate of the Sumitomo Corporation
Group, one of Japan’s leading trading houses,
which has business relationships along the
value chains in a wide range of industries.

SMFL aims to draw on the strengths of the
differing business styles and rich experience of

its two predecessor companies to anticipate
emerging opportunities and offer high-value-
added services that “go beyond leasing” to
meet increasingly diverse customer needs, and
contribute to society by conducting high-quality
leasing activities as one of the leading compa-
nies in its industry.

Company Name: Sumitomo Mitsui Finance and

Leasing Co., Ltd.

Business Profile: Leasing
Establishment: February 4, 1963
Head Office:

Tokyo Head Office: 3-9-4 Nishi-Shimbashi, Minato-ku, Tokyo
Osaka Head Office: 3-10-19, Minami-Semba, Chuo-ku, Osaka

President & CEO: Koji Ishida
Number of Employees: 1,504

The Japan Research Institute, Limited (JRI), is a
“knowledge engineering” company that offers
high-value-added services by effectively com-
bining its capabilities in three fields: namely,
information systems integration, consulting, and
think-tank services. JRI offers consulting ser-
vices—principally focused on management
innovation and IT-related issues, planning and
implementation services for strategic informa-
tion systems, and outsourcing services—for
customers in financial services and a range of
other industrial sectors. In addition, JRI’s wide-
ranging activities cover the issuance of a range
of information, including research and analysis
of the Japanese and overseas economies, for-
mulation of policy recommendations, and
assistance in the incubation of new businesses.
In July 2006, JRI spun off part of its operations

to create JRI Solutions, Limited, with the objec-
tive of strengthening its provision of IT solutions
for corporate customers outside the Group.
Drawing on the rich base of know-how accumu-
lated in developing and operating systems for
the Group companies, JRI Solutions works to
offer the best IT solutions to a wider array of cus-
tomers in the general industrial, financial, and
public sectors.

Company Name: The Japan Research Institute, Limited
Business Profile: Systems engineering, data process-
ing, management consulting, think-
tank services

Establishment: November 1, 2002
Head Office:

Tokyo Head Office: 16 Ichibancho, Chiyoda-ku, Tokyo
Osaka Head Office: 1-5-8 Shinmachi, Nishi-ku, Osaka

President & CEO: Yasuyuki Kimoto
Number of Employees: 3,005 (Including employees of

JRI Solutions)

Credit Ratings (as of June 30, 2007)

R&I
JCR

Long-term
A+
AA −

Short-term
a −1
J −1+

Financial Information (Years ended March 31)

Billions of yen

2008*

2007*

2006*

2005*

For the Year:

Revenue from

leasing operations

¥1,040.5

¥583.6
503.4

¥615.5 ¥580.0
401.9

488.9

Operating revenue

708.4

Operating profit

36.2

630.0
379.9

31.5
24.7

619.7
375.1

32.2
21.4

589.1
356.1

28.0
18.2

* The upper row of figures for 2005, 2006, and 2007 are for SMBC

Leasing and the lower row of figures are for Sumisho Lease.

www.jri.co.jp

Financial Information (Years ended March 31)

Billions of yen

2008*

2007*

2006

2005

For the Year:

Operating revenue

Operating profit

¥122.4 ¥111.8
6.1

5.7

¥115.8 ¥111.2
6.3

5.2

* Figures for fiscal 2007 and 2008 include JRI Solutions, which was

spun off as a separate company in July 2006.

SMBC friend securities co., ltd.

www.smbc-friend.co.jp

Providing a full range of securities services,
focused mainly on retail customers, SMBC
Friend Securities has one of the strongest finan-
cial positions among Japanese securities
companies and boasts highly efficient opera-
tions with a nationwide network of 70 offices.
SMBC Friend Securities offers services closely
tailored to the needs of its customers and the
communities it serves. SMBC Friend Securities
became a wholly owned subsidiary of SMFG
through a share transfer in September 2006,
and is developing business operations jointly
with SMBC and other Group members by
strengthening its ties with these companies.

Going forward, SMBC Friend Securities is
aiming to be “a leading Japanese securities
company serving the retail market”, and, by offer-
ing high-quality products and services matching
the needs of its customers, will continue to build
strong bonds of trust with its customers.

Company Name: SMBC Friend Securities Co., Ltd.
Business Profile: Securities services
Establishment: March 2, 1948
Head Office: 7-12, Kabuto-cho, Nihonbashi, Chuo-ku,

Tokyo

President & CEO: Katsuhiko Tamaki
Number of Employees: 1,989

Financial Information (Years ended March 31)

Billions of yen

2008

2007

2006

2005

For the Year:

Operating revenue

Operating profit

¥60.5
19.0

¥58.7
21.2

¥68.5
31.0

¥52.3
18.0

SMFG 2008

SMFG 2008 21

www.smfg.co.jp

www.smfl.co.jp

Group Companies (as of March 31, 2008)

Company Name:
Business Description:

Our Mission

● To provide optimum added value to our customers and

together with them achieve growth

● To create sustainable shareholder value through busi-

ness growth

● To provide a challenging and professionally rewarding

work environment for our dedicated employees

Establishment:
Head Office:
Chairman of the Board: Masayuki Oku (Concurrent President at Sumitomo

President:

Capital:
Stock Exchange Listings: Tokyo Stock Exchange (First Section)

Mitsui Banking Corporation)
Teisuke Kitayama (Concurrent Chairman of the
Board of Directors at Sumitomo Mitsui Banking
Corporation)
¥1,420.9 billion

Osaka Securities Exchange (First Section)
Nagoya Stock Exchange (First Section)

SUMITOMO MITSUI Banking Corporation

www.smbc.co.jp

Company Name: Sumitomo Mitsui Banking Corporation
Business Profile: Banking
Establishment: June 6, 1996
Head Office: 1-2, Yurakucho 1-chome, Chiyoda-ku,

Tokyo, Japan

Credit Ratings (as of June 30, 2008)

President & CEO: Masayuki Oku
Number of Employees: 17,886
Number of branches and other business locations:

In Japan:

Branches:

1,489*
473

(Including 38 specialized deposit account branches)

Subbranches:
Agency:
Offices handling

non-banking business:
Automated service centers:
Overseas:
Branches:
Subbranches:
Representative offices:

157
1

20
838
40 locations
19
6
15

* The number of domestic branches excludes ATMs located in

retail convenience stores.

Moody’s
Standard & Poor’s
Fitch Ratings
R&I
JCR

Long-term
Aa2
A+
A+
A+
AA −

Short-term
P−1
A−1
F1
a −1
J −1+

Financial Information (Consolidated basis, years ended March 31)

Billions of yen

2008

2007

2006

2005

For the Year:
Ordinary income ¥ 3,411.0 ¥ 2,925.6 ¥ 2,750.2 ¥ 2,691.3
Ordinary income (loss)

716.6

734.9

862.0

(99.7)

Net income (loss)

351.8

401.7

563.5

(278.9)

At Year-End:

Net assets

Total assets

¥ 5,080.7 ¥ 5,412.4 ¥ 3,598.2 ¥ 2,633.9

108,637.7

98,570.6 104,418.5

97,478.3

www.smbc-card.com

tribute to the realization of comfortable and
affluent consumer lifestyles and make further
dramatic advances as a leading brand in its
industry sector.

Company Name: Sumitomo Mitsui Card Company,

JCR

Long-term
A+

Short-term
J −1+

Credit Ratings (as of July 31, 2007)

Limited

Business Profile: Credit card services
Establishment: December 26, 1967
Head Office:

Tokyo Head Office: 1-2-20, Kaigan, Minato-ku, Tokyo
Osaka Head Office: 4-5-15, Imabashi, Chuo-ku, Osaka

President & CEO: Koichi Tsukihara
Number of Employees: 1,989

Financial Information (Years ended March 31)

Billions of yen

2008

2007

2006

2005

For the Year:

Revenue from
credit card operations ¥5,375.2 ¥4,753.8 ¥4,181.3 ¥3,598.7
Operating revenue
132.1

148.2

157.6

168.4

Operating profit

16.9

14.1

25.8

23.1

At Year-End:

Number of cardholders
(in thousands)

1,640.6 1,495.1

1,406.7 1,346.2

SMFL aims to draw on the strengths of the
differing business styles and rich experience of

Company Name: Sumitomo Mitsui Finance and

Leasing Co., Ltd.

Business Profile: Leasing
Establishment: February 4, 1963
Head Office:

Tokyo Head Office: 3-9-4 Nishi-Shimbashi, Minato-ku, Tokyo
Osaka Head Office: 3-10-19, Minami-Semba, Chuo-ku, Osaka

President & CEO: Koji Ishida
Number of Employees: 1,504

Company Name: The Japan Research Institute, Limited
Business Profile: Systems engineering, data process-
ing, management consulting, think-
tank services

Establishment: November 1, 2002
Head Office:

Tokyo Head Office: 16 Ichibancho, Chiyoda-ku, Tokyo
Osaka Head Office: 1-5-8 Shinmachi, Nishi-ku, Osaka

President & CEO: Yasuyuki Kimoto
Number of Employees: 3,005 (Including employees of

JRI Solutions)

Credit Ratings (as of June 30, 2007)

R&I
JCR

Long-term
A+
AA −

Short-term
a −1
J −1+

Financial Information (Years ended March 31)

Billions of yen

2008*

2007*

2006*

2005*

For the Year:

Revenue from

leasing operations

¥1,040.5

¥583.6
503.4

¥615.5 ¥580.0
401.9

488.9

Operating revenue

708.4

Operating profit

36.2

630.0
379.9

31.5
24.7

619.7
375.1

32.2
21.4

589.1
356.1

28.0
18.2

* The upper row of figures for 2005, 2006, and 2007 are for SMBC

Leasing and the lower row of figures are for Sumisho Lease.

www.jri.co.jp

Financial Information (Years ended March 31)

Billions of yen

2008*

2007*

2006

2005

For the Year:

Operating revenue

Operating profit

¥122.4 ¥111.8
6.1

5.7

¥115.8 ¥111.2
6.3

5.2

* Figures for fiscal 2007 and 2008 include JRI Solutions, which was

spun off as a separate company in July 2006.

SMBC friend securities co., ltd.

www.smbc-friend.co.jp

Company Name: SMBC Friend Securities Co., Ltd.
Business Profile: Securities services
Establishment: March 2, 1948
Head Office: 7-12, Kabuto-cho, Nihonbashi, Chuo-ku,

Tokyo

President & CEO: Katsuhiko Tamaki
Number of Employees: 1,989

Financial Information (Years ended March 31)

Billions of yen

2008

2007

2006

2005

For the Year:

Operating revenue

Operating profit

¥60.5
19.0

¥58.7
21.2

¥68.5
31.0

¥52.3
18.0

SMFG 2008

SMFG 2008 21

Financial Highlights

Sumitomo Mitsui Financial Group

◆ Consolidated

Year ended March 31
For the Year:

2008

2007

Total income .............................................................
Total expenses .........................................................
Net income (loss) ......................................................

¥ 4,739,040
3,810,084
461,536

At Year-End:

Total net assets ........................................................
Total assets ...............................................................
Risk-monitored loans ................................................
Reserve for possible loan losses ..............................
Net unrealized gains on other securities ...................
Number of employees ...............................................

¥ 5,224,076
111,955,918
1,092,661
894,702
745,420
46,429

Selected Ratios:

Capital ratio ...............................................................
Return on Equity .......................................................
Price Earnings Ratio .................................................

10.56%
13.23%
11.06x

Per Share (Yen):

¥ 3,947,786
3,140,996
441,351

¥ 5,331,279
100,858,309
1,067,386
889,093
1,825,168
41,428

11.31%
13.07%
18.74x

Millions of yen
2006

¥ 3,803,089
2,759,726
686,841

¥ 4,454,399
107,010,575
1,243,160
1,035,468
1,373,337
40,681

12.39%
33.15%
13.72x

2005

2004

¥ 3,589,871
3,698,406
(234,201)

¥ 2,775,728
99,731,858
2,227,445
1,273,560
696,339
40,683

9.94%
—%
—x

¥ 3,669,531
3,264,636
330,414

¥ 3,070,942
102,215,172
3,297,981
1,422,486
575,612
42,014

11.37%
31.68%
14.71x

◆ Nonconsolidated

Year ended March 31
For the Year:

2008

2007

Operating income .....................................................
Dividends on investments in subsidiaries and affiliates ....
Operating expenses ..................................................
Net income ................................................................

At Year-End:

Total net assets (A) ...................................................
Total assets (B) .........................................................
Total net assets to total assets (A) / (B) ....................
Capital stock..............................................................

Number of shares issued

¥ 111,637
89,693
6,246
82,975

¥ 2,968,749
4,021,217
73.83%
1,420,877

Preferred stock ..............................................
Common stock ..............................................
Number of employees ...............................................

120,101
7,733,653
136

¥ 376,479
366,680
3,641
363,535

¥ 2,997,898
3,959,444
75.72%
1,420,877

120,101
7,733,653
131

Selected Ratios:

Millions of yen
2006

¥ 55,482
46,432
3,196
73,408

¥ 3,935,426
4,166,332
94.46%
1,420,877

950,101
7,424,172
124

2005

2004

¥ 258,866
251,735
2,644
252,228

¥ 3,319,615
3,795,110
87.47%
1,352,651

1,057,188
6,273,792
115

¥ 55,515
47,332
3,044
50,505

¥ 3,172,721
3,403,007
93.23%
1,247,650

1,132,099
5,796,010
97

Net assets .................................................................
Net income (loss) ......................................................
Net income — diluted ...............................................

¥ 424,546.01
59,298.24
56,657.41

¥ 469,228.59
57,085.83
51,494.17

¥ 400,168.89
94,733.62
75,642.93

¥164,821.08
(44,388.07)
—

¥215,454.83
52,314.75
35,865.20

Return on Equity........................................................
Price Earnings Ratio..................................................
Dividend payout ratio ................................................

2.67%
71.82x
131.37%

13.71%
23.10x
15.31%

2.38%
190.16x
46.64%

15.47%
18.95x
7.81%

1.57%
207.86x
80.97%

Notes: 1. Net unrealized gains on other securities represent the difference between the market prices and acquisition costs (or amortized costs) of “other securities.” In principle, the value of stocks is calculated using the

average market prices during the final month of the period. For further details, please refer to page 27.

2. The number of employees has been reported on the basis of full-time workers. The number of employees includes locally hired overseas staff members but excludes contract employees and temporary staff.
3. From the fiscal year ended March 31, 2007, SMFG has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Accounting Standards Board of Japan (ASBJ) Statement No. 5) and

“Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

4. The ASBJ has revised “Guidance on Accounting Standard for Earnings per Share” (ASBJ Guidance No. 4). From the fiscal year ended March 31, 2007, SMFG has applied the revised Guidance and calculated

net assets per share by including net deferred gains (losses) on hedges.

5. From the fiscal year ended March 31, 2007 (fiscal 2006), the consolidated capital ratio has been calculated according to the formula specified in Financial Services Agency (FSA) Notification No. 20 issued in
fiscal 2006, which is based on Article 52-25 of the Banking Law of Japan. The capital ratio of SMFG is calculated under Basel II. Please note that in fiscal 2005 and prior years, the capital ratio was calculated
according to the formula specified in the Ministry of Finance Notification No. 62 issued in fiscal 1998, which was based on Article 52-25 of the Banking Law of Japan.

Per Share (Yen):

Net assets..................................................................
Dividends:

Common stock.....................................................
Preferred stock (Type 1) ......................................
Preferred stock (Type 2) ......................................
Preferred stock (Type 3) ......................................
Preferred stock (1st series Type 4) .....................
Preferred stock (2nd series Type 4) ....................
Preferred stock (3rd series Type 4) .....................
Preferred stock (4th series Type 4) .....................
Preferred stock (5th series Type 4) .....................
Preferred stock (6th series Type 4) .....................
Preferred stock (7th series Type 4) .....................
Preferred stock (8th series Type 4) .....................
Preferred stock (9th series Type 4) .....................
Preferred stock (10th series Type 4) ...................
Preferred stock (11th series Type 4) ...................
Preferred stock (12th series Type 4) ...................
Preferred stock (13th series Type 4) ...................
Preferred stock (1st series Type 6) .....................
Net income ................................................................
Net income — diluted ................................................

¥339,454.71

¥342,382.75

¥330,206.27

¥257,487.78

¥232,550.74

12,000
—
—
—
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
/
88,500
9,134.13
9,133.76

7,000
—
—
—
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
/
88,500
46,326.41
41,973.46

3,000
10,500
28,500
13,700
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
/
88,500
6,836.35
6,737.46

3,000
10,500
28,500
13,700
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
67,500
728
38,302.88
25,178.44

3,000
10,500
28,500
13,700
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
67,500
/
3,704.49
3,690.72

Notes: 1. All SMFG employees are seconded from SMBC and other Group companies.

2. From the fiscal year ended March 31, 2007, in calculating total net assets and total assets, SMFG has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Statement No. 5)

and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

3. The ASBJ has revised “Guidance on Accounting Standard for Earnings per Share” (ASBJ Guidance No. 4). From the fiscal year ended March 31, 2007, SMFG has applied the revised Guidance and calculated

net assets per share by including net deferred gains (losses) on hedges.

SMFG 2008

SMFG 2008 23

Financial Highlights

Sumitomo Mitsui Financial Group

◆ Consolidated

Year ended March 31
For the Year:

2008

2007

¥ 4,739,040
3,810,084
461,536

At Year-End:

¥ 5,224,076
111,955,918
1,092,661
894,702
745,420
46,429

Selected Ratios:

10.56%
13.23%
11.06x

Per Share (Yen):

¥ 3,947,786
3,140,996
441,351

¥ 5,331,279
100,858,309
1,067,386
889,093
1,825,168
41,428

11.31%
13.07%
18.74x

Millions of yen
2006

¥ 3,803,089
2,759,726
686,841

¥ 4,454,399
107,010,575
1,243,160
1,035,468
1,373,337
40,681

12.39%
33.15%
13.72x

2005

2004

¥ 3,589,871
3,698,406
(234,201)

¥ 2,775,728
99,731,858
2,227,445
1,273,560
696,339
40,683

9.94%
—%
—x

¥ 3,669,531
3,264,636
330,414

¥ 3,070,942
102,215,172
3,297,981
1,422,486
575,612
42,014

11.37%
31.68%
14.71x

◆ Nonconsolidated

Year ended March 31
For the Year:

2008

2007

At Year-End:

Number of shares issued

¥ 111,637
89,693
6,246
82,975

¥ 2,968,749
4,021,217
73.83%
1,420,877

Preferred stock ..............................................
Common stock ..............................................
Number of employees ...............................................

120,101
7,733,653
136

¥ 376,479
366,680
3,641
363,535

¥ 2,997,898
3,959,444
75.72%
1,420,877

120,101
7,733,653
131

Selected Ratios:

Millions of yen
2006

¥ 55,482
46,432
3,196
73,408

¥ 3,935,426
4,166,332
94.46%
1,420,877

950,101
7,424,172
124

2005

2004

¥ 258,866
251,735
2,644
252,228

¥ 3,319,615
3,795,110
87.47%
1,352,651

1,057,188
6,273,792
115

¥ 55,515
47,332
3,044
50,505

¥ 3,172,721
3,403,007
93.23%
1,247,650

1,132,099
5,796,010
97

¥ 424,546.01
59,298.24
56,657.41

¥ 469,228.59
57,085.83
51,494.17

¥ 400,168.89
94,733.62
75,642.93

¥164,821.08
(44,388.07)
—

¥215,454.83
52,314.75
35,865.20

2.67%
71.82x
131.37%

13.71%
23.10x
15.31%

2.38%
190.16x
46.64%

15.47%
18.95x
7.81%

1.57%
207.86x
80.97%

average market prices during the final month of the period. For further details, please refer to page 27.

“Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

net assets per share by including net deferred gains (losses) on hedges.

Per Share (Yen):

Net assets..................................................................
Dividends:

¥339,454.71

¥342,382.75

¥330,206.27

¥257,487.78

¥232,550.74

12,000
—
—
—
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
/
88,500
9,134.13
9,133.76

7,000
—
—
—
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
/
88,500
46,326.41
41,973.46

3,000
10,500
28,500
13,700
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
/
88,500
6,836.35
6,737.46

3,000
10,500
28,500
13,700
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
67,500
728
38,302.88
25,178.44

3,000
10,500
28,500
13,700
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
67,500
/
3,704.49
3,690.72

Notes: 1. All SMFG employees are seconded from SMBC and other Group companies.

and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

net assets per share by including net deferred gains (losses) on hedges.

SMFG 2008

SMFG 2008 23

Sumitomo Mitsui Banking Corporation

◆ Consolidated

Year ended March 31
For the Year:

2008

2007

Total income ..............................................................
Total expenses ..........................................................
Net income (loss) ......................................................

¥ 3,417,611
2,691,606
351,820

At Year-End:

Total net assets ........................................................
Total assets ..............................................................
Risk-monitored loans ................................................
Reserve for possible loan losses ..............................
Net unrealized gains on other securities ...................
Number of employees ...............................................

¥ 5,080,747
108,637,791
1,073,471
848,031
754,456
36,085

Selected Ratios:

¥ 2,971,693
2,220,971
401,795

¥ 5,412,458
98,570,638
1,047,566
860,799
1,852,971
31,718

Millions of yen
2006

¥ 2,789,433
1,903,374
563,584

¥ 3,598,294
104,418,597
1,219,383
1,006,223
1,337,192
32,918

2005

2004

¥ 2,699,202
2,875,897
(278,995)

¥ 2,633,912
97,478,308
2,186,739
1,239,882
678,527
32,868

¥ 2,843,502
2,487,197
301,664

¥ 2,722,161
99,843,258
3,229,219
1,375,921
568,407
33,895

Capital ratio ...............................................................
Return on Equity .......................................................

12.19%
9.56%

12.95%
12.95%

10.77%
30.15%

10.60%
—%

10.89%
25.38%

Per Share (Yen):

¥ 60,442.81
6,132.91
6,132.75

¥ 67,823.69
7,072.09
7,012.46

¥ 41,444.83
9,864.54
9,827.19

¥ 23,977.62
(5,300.46)
—

¥ 25,928.02
5,238.85
5,231.31

average market prices during the final month of the period.

2. The number of employees has been reported on the basis of full-time workers. The number of employees includes locally hired overseas staff members but excludes contract employees and temporary staff.
3. From the fiscal year ended March 31, 2007, SMBC has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Accounting Standards Board of Japan (ASBJ) Statement No. 5) and

“Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

4. The ASBJ has revised “Guidance on Accounting Standard for Earnings per Share” (ASBJ Guidance No. 4). From the fiscal year ended March 31, 2007, SMBC has applied the revised Guidance and calculated

net assets per share by including net deferred gains (losses) on hedges.

5. From the fiscal year ended March 31, 2007 (fiscal 2006), the consolidated capital ratio has been calculated according to the formula specified in the Financial Services Agency (FSA) Notification No. 19 issued

in fiscal 2006, which is based on Article 14-2 of the Banking Law of Japan. The consolidated capital ratio of SMBC is calculated according to Basel II. Please note that in fiscal 2005 and prior years, the
capital ratio was calculated according to the formula specified in Ministry of Finance Notification No. 55 issued in fiscal 1993, which was based on Article 14-2 of the Banking Law of Japan.

◆ Nonconsolidated

Year ended March 31
For the Year:

Gross banking profit (A) ......................................
Banking profit ......................................................
Banking profit (before provision for general

reserve for possible loan losses) ....................
Expenses (excluding nonrecurring losses)(B) ....

At Year-End:

Total net assets .........................................................
Total assets ..............................................................
Deposits ....................................................................
Loans and bills discounted .......................................
Securities...................................................................
Risk-monitored loans ................................................
Problem assets based on the

Financial Reconstruction Law .................................
Reserve for possible loan losses ..............................
Net unrealized gains on other securities ...................
Trust assets and liabilities .........................................
Loans and bills discounted .................................
Securities.............................................................
Capital stock..............................................................

Number of shares issued (in thousands)

Preferred stock ..............................................
Common stock...............................................
Number of employees ...............................................

Selected Ratios:

Capital ratio ...............................................................
Return on Equity .......................................................
Dividend payout ratio ................................................
Overhead ratio (B) / (A) ............................................

Per Share (Yen):

Net assets .................................................................
Dividends:

Common stock.....................................................
Preferred stock (Type 1) .....................................
Preferred stock (Type 2) .....................................
Preferred stock (Type 3) .....................................
Preferred stock (1st series Type 6) .....................
Net income (loss) ......................................................
Net income — diluted ................................................

2008

2007

Millions of yen
2006

2005

2004

¥ 2,944,677
2,437,222
205,742

¥ 2,492,577
1,905,648
315,740

¥ 2,322,699
1,576,026
519,520

¥ 2,290,935
2,391,014
(136,854)

¥ 2,489,187
2,170,341
301,113

1,484,783
819,691

819,691
665,091

¥ 3,493,249
100,033,020
69,382,834
56,957,813
22,758,241
770,587

803,939
620,004
755,749
1,175,711
223,740
273,504
664,986

70
56,355
17,886

12.67%
5.64%
41.99%
44.8%

1,344,490
782,330

740,601
603,888

¥ 3,992,884
91,537,228
68,809,338
53,756,440
20,060,873
721,064

738,667
677,573
1,832,891
1,174,396
5,350
267,110
664,986

70
56,355
16,407

13.45%
10.13%
13.89%
44.9%

1,552,033
810,593

965,573
586,459

¥ 3,634,776
97,443,428
68,222,167
51,857,559
25,202,541
914,173

960,095
816,437
1,316,206
1,305,915
7,870
238,205
664,986

900
55,212
16,050

11.35%
26.57%
63.02%
37.8%

1,522,861
1,291,972

940,495
582,365

¥ 2,752,735
91,129,776
65,591,627
50,067,586
23,676,696
1,735,863

1,824,622
989,121
651,385
777,177
9,780
81,840
664,986

900
55,212
16,338

11.32%
—%
—%
38.2%

1,584,127
1,000,132

1,000,132
583,995

¥ 2,870,870
94,109,074
63,656,771
50,810,144
26,592,584
2,774,889

2,811,234
1,250,751
556,146
429,388
10,000
4,645
559,985

967
54,811
17,546

11.36%
22.49%
79.88%
36.9%

¥ 58,204.22

¥ 67,124.90

¥ 42,105.57

¥ 26,129.71

¥ 28,641.10

1,487
/
/
/
88,500
3,540.84
—

763
/
/
/
88,500
5,533.69
5,487.21

5,714
10,500
28,500
13,700
88,500
9,066.46
9,050.63

683
10,500
28,500
13,700
485
(2,718.23)
—

4,177
10,500
28,500
13,700
/
5,228.80
5,221.53

Notes: 1. For definitions of risk-monitored loans and problem assets based on the Financial Reconstruction Law, please refer to page 185.

2. Net unrealized gains on other securities represent the difference between the market prices and acquisition costs (or amortized costs) of “other securities.” The value of stocks is calculated using the average

market prices during the final month of the period. For further details, please refer to page 32.

3. The number of employees has been reported on the basis of full-time workers. The number of employees includes locally hired overseas staff members but excludes contract employees, temporary staff, and

executive officers who are not also Board members.

4. From the fiscal year ended March 31, 2007, SMBC has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Accounting Standards Board of Japan (ASBJ) Statement No. 5) and

“Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

5. The ASBJ has revised “Guidance on Accounting Standard for Earnings per Share” (ASBJ Guidance No. 4). From the fiscal year ended March 31, 2007, SMBC has applied the revised Guidance and calculated

net assets per share by including net deferred gains (losses) on hedges.

6. From the fiscal year ended March 31, 2007 (fiscal 2006), the nonconsolidated capital ratio has been calculated according to the formula specified in the Financial Services Agency (FSA) Notification No. 19

issued in fiscal 2006, which is based on Article 14-2 of the Banking Law of Japan. The nonconsolidated capital ratio of SMBC is calculated according to Basel II. Please note that, in fiscal 2005 and prior years,
the capital ratio was calculated according to the formula specified in the Ministry of Finance Notification No. 55 issued in 1993, which was based on Article 14-2 of the Banking Law of Japan.

SMFG 2008

SMFG 2008 25

Sumitomo Mitsui Banking Corporation

◆ Consolidated

Year ended March 31
For the Year:

2008

2007

¥ 3,417,611
2,691,606
351,820

At Year-End:

¥ 5,080,747
108,637,791
1,073,471
848,031
754,456
36,085

Selected Ratios:

¥ 2,971,693
2,220,971
401,795

¥ 5,412,458
98,570,638
1,047,566
860,799
1,852,971
31,718

Millions of yen
2006

¥ 2,789,433
1,903,374
563,584

¥ 3,598,294
104,418,597
1,219,383
1,006,223
1,337,192
32,918

2005

2004

¥ 2,699,202
2,875,897
(278,995)

¥ 2,633,912
97,478,308
2,186,739
1,239,882
678,527
32,868

¥ 2,843,502
2,487,197
301,664

¥ 2,722,161
99,843,258
3,229,219
1,375,921
568,407
33,895

Capital ratio ...............................................................
Return on Equity .......................................................

12.19%
9.56%

12.95%
12.95%

10.77%
30.15%

10.60%
—%

10.89%
25.38%

Per Share (Yen):

¥ 60,442.81
6,132.91
6,132.75

¥ 67,823.69
7,072.09
7,012.46

¥ 41,444.83
9,864.54
9,827.19

¥ 23,977.62
(5,300.46)
—

¥ 25,928.02
5,238.85
5,231.31

average market prices during the final month of the period.

2. The number of employees has been reported on the basis of full-time workers. The number of employees includes locally hired overseas staff members but excludes contract employees and temporary staff.
3. From the fiscal year ended March 31, 2007, SMBC has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Accounting Standards Board of Japan (ASBJ) Statement No. 5) and

“Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

net assets per share by including net deferred gains (losses) on hedges.

◆ Nonconsolidated

Year ended March 31
For the Year:

Gross banking profit (A) ......................................
Banking profit ......................................................
Banking profit (before provision for general

reserve for possible loan losses) ....................
Expenses (excluding nonrecurring losses)(B) ....

At Year-End:

Number of shares issued (in thousands)

Preferred stock ..............................................
Common stock...............................................
Number of employees ...............................................

Selected Ratios:

Per Share (Yen):

Net assets .................................................................
Dividends:

2008

2007

Millions of yen
2006

2005

2004

¥ 2,944,677
2,437,222
205,742

¥ 2,492,577
1,905,648
315,740

¥ 2,322,699
1,576,026
519,520

¥ 2,290,935
2,391,014
(136,854)

¥ 2,489,187
2,170,341
301,113

1,484,783
819,691

819,691
665,091

¥ 3,493,249
100,033,020
69,382,834
56,957,813
22,758,241
770,587

803,939
620,004
755,749
1,175,711
223,740
273,504
664,986

70
56,355
17,886

12.67%
5.64%
41.99%
44.8%

1,344,490
782,330

740,601
603,888

¥ 3,992,884
91,537,228
68,809,338
53,756,440
20,060,873
721,064

738,667
677,573
1,832,891
1,174,396
5,350
267,110
664,986

70
56,355
16,407

13.45%
10.13%
13.89%
44.9%

1,552,033
810,593

965,573
586,459

¥ 3,634,776
97,443,428
68,222,167
51,857,559
25,202,541
914,173

960,095
816,437
1,316,206
1,305,915
7,870
238,205
664,986

900
55,212
16,050

11.35%
26.57%
63.02%
37.8%

1,522,861
1,291,972

940,495
582,365

¥ 2,752,735
91,129,776
65,591,627
50,067,586
23,676,696
1,735,863

1,824,622
989,121
651,385
777,177
9,780
81,840
664,986

900
55,212
16,338

11.32%
—%
—%
38.2%

1,584,127
1,000,132

1,000,132
583,995

¥ 2,870,870
94,109,074
63,656,771
50,810,144
26,592,584
2,774,889

2,811,234
1,250,751
556,146
429,388
10,000
4,645
559,985

967
54,811
17,546

11.36%
22.49%
79.88%
36.9%

¥ 58,204.22

¥ 67,124.90

¥ 42,105.57

¥ 26,129.71

¥ 28,641.10

1,487
/
/
/
88,500
3,540.84
—

763
/
/
/
88,500
5,533.69
5,487.21

5,714
10,500
28,500
13,700
88,500
9,066.46
9,050.63

683
10,500
28,500
13,700
485
(2,718.23)
—

4,177
10,500
28,500
13,700
/
5,228.80
5,221.53

Notes: 1. For definitions of risk-monitored loans and problem assets based on the Financial Reconstruction Law, please refer to page 185.

market prices during the final month of the period. For further details, please refer to page 32.

executive officers who are not also Board members.

“Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).

net assets per share by including net deferred gains (losses) on hedges.

SMFG 2008

SMFG 2008 25

Financial Review

Sumitomo Mitsui Financial Group (Consolidated)

This section summarizes SMFG’s principal financial indicators
for the fiscal years ended March 31, 2008 and 2007, on a consolidated basis.

1. Operating Results

Operating results for fiscal 2007 include the results of 268 consoli-

contracted its holdings to reduce risk, during the fiscal year under

dated subsidiaries (158 in Japan and 110 overseas) and 74

review, SMBC managed its portfolio to take advantage of move-

subsidiaries and affiliates accounted for by the equity method (48

ments in interest rates in Japan and overseas and reported a

in Japan and 26 overseas).

major increase in net trading income. After taking account of

Gross profit increased ¥210.0 billion year on year, to ¥2,116.2

general and administrative expenses, credit cost, net gains on

billion. The principal reason for this increase was an improvement

stocks, equity in earnings (losses) of affiliates, and other items,

in net trading income. Although in the previous year SMBC

ordinary profit increased ¥32.5 billion, to ¥831.1 billion. Net

reported losses on the sale of bonds from its portfolio, as it

income—which is ordinary profit after taking account of extra-

◆Number of Consolidated Subsidiaries and Subsidiaries and Affiliates Accounted for by the Equity Method

March 31
Consolidated subsidiaries ..................................................................................................................
Subsidiaries and affiliates accounted for by the equity method ........................................................

2008 (A)

2007 (B)

268
74

181
62

◆Income Summary

Year ended March 31
Consolidated gross profit ...................................................................................................................
Net interest income ......................................................................................................................
Trust fees .....................................................................................................................................
Net fees and commissions ...........................................................................................................
Net trading income .......................................................................................................................
Net other operating income (expenses) .......................................................................................
General and administrative expenses ...............................................................................................
Credit cost (A) ....................................................................................................................................
Write-off of loans ..........................................................................................................................
Provision for specific reserve for possible loan losses .................................................................
Provision for general reserve for possible loan losses .................................................................
Others ..........................................................................................................................................
Net gains (losses) on stocks ..............................................................................................................
Equity in earnings (losses) of affiliates ...............................................................................................
Net other income (expenses) .............................................................................................................
Ordinary profit ....................................................................................................................................
Extraordinary gains (losses) ..............................................................................................................
Losses on impairment of fixed assets ..........................................................................................
Gains on collection of written-off claims (B) .................................................................................
Gains on return of securities from retirement benefits trust .........................................................
Gain due to change in equity ownership of affiliates ....................................................................
Income before income taxes and minority interests ...........................................................................
Income taxes:

Current .........................................................................................................................................
Deferred .......................................................................................................................................
Minority interests in net income .........................................................................................................
Net income .........................................................................................................................................
Total credit cost (A) + (B) ...................................................................................................................
[Reference]
Consolidated banking profit (Billions of yen) ......................................................................................

2008 (A)
¥2,116,248
1,210,383
3,752
611,993
469,571
(179,453)
(978,896)
(249,922)
(141,750)
(172,570)
99,350
(34,952)
(7,063)
(41,760)
(7,444)
831,160
97,795
(5,161)
1,355
—
103,133
928,955

(103,900)
(282,538)
(80,980)
¥ 461,536
¥ (248,566)

Millions of yen

2007 (B)
¥1,906,173
1,168,592
3,508
609,185
125,625
(738)
(888,561)
(146,186)
(81,415)
(77,446)
53,370
(40,695)
44,730
(104,170)
(13,374)
798,610
8,180
(30,548)
1,236
36,330
—
806,790

(87,818)
(218,770)
(58,850)
¥ 441,351
¥ (144,950)

Increase (decrease)
(A) – (B)

87
12

Increase (decrease)
(A) – (B)
¥ 210,075
41,791
244
2,808
343,946
(178,715)
(90,335)
(103,736)
(60,335)
(95,124)
45,980
5,743
(51,793)
62,410
5,930
32,550
89,615
25,387
119
(36,330)
103,133
122,165

(16,082)
(63,768)
(22,130)
¥ 20,185
¥(103,616)

¥ 1,022.9

¥ 924.2

98.7

ordinary gains (losses), income taxes, and other items—rose

Meanwhile, loans and bills discounted rose ¥3,455.5 billion

¥20.1 billion, to ¥461.5 billion.

year on year, to ¥62,144.8 billion, and the balance of securities

In addition, deposits at the end of the fiscal year under review

increased ¥2,980.0 billion, to ¥23,517.5 billion.

rose ¥534.4 billion in comparison with March 31, 2007, to

Net assets amounted to ¥5,224.0 billion, and, of this total,

¥72,690.6 billion, and negotiable certificates of deposit increased

stockholders’ equity was ¥3,095.3 billion.

¥488.9 billion, to ¥3,078.1 billion.

◆Assets, Liabilities and Net Assets

March 31
Assets ................................................................................................................................................
Securities .....................................................................................................................................
Loans and bills discounted ..........................................................................................................
Liabilities ............................................................................................................................................
Deposits........................................................................................................................................
................................................................................................
Negotiable certificates of deposit
Net assets ..........................................................................................................................................

2008 (A)
¥111,955,918
23,517,501
62,144,874
106,731,842
72,690,624
3,078,149
5,224,076

Millions of yen

2007 (B)
¥100,858,309
20,537,500
58,689,322
95,527,029
72,156,224
2,589,217
5,331,279

Increase (decrease)
(A) – (B)
¥11,097,609
2,980,001
3,455,552
11,204,813
534,400
488,932
(107,203)

2. Unrealized Gains (Losses) on Securities

Net unrealized gains on securities as of March 31, 2008,

other securities, including “other money held in trust”—which are

amounted to ¥762.1 billion, a decline of ¥1,050.2 billion from the

directly credited to net assets—declined ¥1,080.0 billion, to

end of the previous fiscal year, reflecting a decrease in the value

¥745.3 billion.

of equities and other factors. Of this total, net unrealized gains on

◆Unrealized Gains (Losses) on Securities

2008

Millions of yen

March 31

Net unrealized
gains (losses) (A)

Held-to-maturity securities .............................
Other securities .............................................
Stocks ......................................................
Bonds ......................................................
Others ......................................................
Other money held in trust ..............................
Total ...............................................................
Stocks ......................................................
Bonds ......................................................
Others ......................................................

¥ 16,755
745,420
936,228
(132,892)
(57,915)
(29)
762,146
936,228
(115,944)
(58,137)

(A) – (B)

¥ 29,820
(1,079,748)
(1,036,419)
24,475
(67,803)
(351)
(1,050,278)
(1,036,419)
54,669
(68,528)

Unrealized
gains

¥ 18,379
1,042,530
999,414
18,645
24,469
—
1,060,909
999,414
37,025
24,469

Unrealized
losses

Net unrealized
gains (losses) (B)

¥ 1,623
297,109
63,186
151,537
82,385
29
298,763
63,186
152,969
82,607

¥ (13,065)
1,825,168
1,972,647
(157,367)
9,888
322
1,812,424
1,972,647
(170,613)
10,391

2007
Unrealized
gains

¥ 200
2,032,120
1,987,337
1,805
42,977
322
2,032,643
1,987,337
1,825
43,480

Unrealized
losses

¥ 13,266
206,952
14,689
159,173
33,089
—
220,218
14,689
172,439
33,089

Notes: 1. The figures above include unrealized gains (losses) on negotiable certificates of deposit bought in “Deposits with banks” and beneficiary certificates on loan trusts in “Commercial paper and other debt

purchased.”

2. Unrealized gains (losses) on stocks are mainly calculated using the average market price during the final month of the respective reporting period. The remainder of the securities are valued at the market price as

of the balance sheet date.

3. “Other securities” and “Other money held in trust” are valued and recorded on the consolidated balance sheet at market prices. The figures in the table above indicate the differences between the acquisition costs

(or amortized costs) and the balance sheet amounts.

Notes: 1. Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fees and commissions (income) – Fees and commissions (expenses)) + (Trading profits – Trading losses) + (Other operating

income – Other operating expenses)

2. Consolidated banking profit = SMBC’s nonconsolidated banking profit (before provision for general reserve for possible loan losses) + SMFG’s ordinary profit + Ordinary profit of other subsidiaries (excluding

nonrecurring factors) + (Ordinary profit of equity-method affiliates x Ownership ratio) – Internal transactions (dividends, etc.)

SMFG 2008

SMFG 2008 27

Financial Review

Sumitomo Mitsui Financial Group (Consolidated)

This section summarizes SMFG’s principal financial indicators
for the fiscal years ended March 31, 2008 and 2007, on a consolidated basis.

1. Operating Results

Operating results for fiscal 2007 include the results of 268 consoli-

contracted its holdings to reduce risk, during the fiscal year under

dated subsidiaries (158 in Japan and 110 overseas) and 74

review, SMBC managed its portfolio to take advantage of move-

subsidiaries and affiliates accounted for by the equity method (48

ments in interest rates in Japan and overseas and reported a

in Japan and 26 overseas).

major increase in net trading income. After taking account of

Gross profit increased ¥210.0 billion year on year, to ¥2,116.2

general and administrative expenses, credit cost, net gains on

billion. The principal reason for this increase was an improvement

stocks, equity in earnings (losses) of affiliates, and other items,

in net trading income. Although in the previous year SMBC

ordinary profit increased ¥32.5 billion, to ¥831.1 billion. Net

reported losses on the sale of bonds from its portfolio, as it

income—which is ordinary profit after taking account of extra-

◆Number of Consolidated Subsidiaries and Subsidiaries and Affiliates Accounted for by the Equity Method

2008 (A)

2007 (B)

268
74

181
62

◆Income Summary

2008 (A)
¥2,116,248
1,210,383
3,752
611,993
469,571
(179,453)
(978,896)
(249,922)
(141,750)
(172,570)
99,350
(34,952)
(7,063)
(41,760)
(7,444)
831,160
97,795
(5,161)
1,355
—
103,133
928,955

(103,900)
(282,538)
(80,980)
¥ 461,536
¥ (248,566)

Millions of yen

2007 (B)
¥1,906,173
1,168,592
3,508
609,185
125,625
(738)
(888,561)
(146,186)
(81,415)
(77,446)
53,370
(40,695)
44,730
(104,170)
(13,374)
798,610
8,180
(30,548)
1,236
36,330
—
806,790

(87,818)
(218,770)
(58,850)
¥ 441,351
¥ (144,950)

Increase (decrease)
(A) – (B)

87
12

Increase (decrease)
(A) – (B)
¥ 210,075
41,791
244
2,808
343,946
(178,715)
(90,335)
(103,736)
(60,335)
(95,124)
45,980
5,743
(51,793)
62,410
5,930
32,550
89,615
25,387
119
(36,330)
103,133
122,165

(16,082)
(63,768)
(22,130)
¥ 20,185
¥(103,616)

¥ 1,022.9

¥ 924.2

98.7

ordinary gains (losses), income taxes, and other items—rose

Meanwhile, loans and bills discounted rose ¥3,455.5 billion

¥20.1 billion, to ¥461.5 billion.

year on year, to ¥62,144.8 billion, and the balance of securities

In addition, deposits at the end of the fiscal year under review

increased ¥2,980.0 billion, to ¥23,517.5 billion.

rose ¥534.4 billion in comparison with March 31, 2007, to

Net assets amounted to ¥5,224.0 billion, and, of this total,

¥72,690.6 billion, and negotiable certificates of deposit increased

stockholders’ equity was ¥3,095.3 billion.

¥488.9 billion, to ¥3,078.1 billion.

◆Assets, Liabilities and Net Assets

2008 (A)
¥111,955,918
23,517,501
62,144,874
106,731,842
72,690,624
3,078,149
5,224,076

Millions of yen

2007 (B)
¥100,858,309
20,537,500
58,689,322
95,527,029
72,156,224
2,589,217
5,331,279

Increase (decrease)
(A) – (B)
¥11,097,609
2,980,001
3,455,552
11,204,813
534,400
488,932
(107,203)

2. Unrealized Gains (Losses) on Securities

Net unrealized gains on securities as of March 31, 2008,

other securities, including “other money held in trust”—which are

amounted to ¥762.1 billion, a decline of ¥1,050.2 billion from the

directly credited to net assets—declined ¥1,080.0 billion, to

end of the previous fiscal year, reflecting a decrease in the value

¥745.3 billion.

of equities and other factors. Of this total, net unrealized gains on

◆Unrealized Gains (Losses) on Securities

2008

Millions of yen

March 31

Net unrealized
gains (losses) (A)

¥ 16,755
745,420
936,228
(132,892)
(57,915)
(29)
762,146
936,228
(115,944)
(58,137)

(A) – (B)

¥ 29,820
(1,079,748)
(1,036,419)
24,475
(67,803)
(351)
(1,050,278)
(1,036,419)
54,669
(68,528)

Unrealized
gains

¥ 18,379
1,042,530
999,414
18,645
24,469
—
1,060,909
999,414
37,025
24,469

Unrealized
losses

Net unrealized
gains (losses) (B)

¥ 1,623
297,109
63,186
151,537
82,385
29
298,763
63,186
152,969
82,607

¥ (13,065)
1,825,168
1,972,647
(157,367)
9,888
322
1,812,424
1,972,647
(170,613)
10,391

2007
Unrealized
gains

¥ 200
2,032,120
1,987,337
1,805
42,977
322
2,032,643
1,987,337
1,825
43,480

Unrealized
losses

¥ 13,266
206,952
14,689
159,173
33,089
—
220,218
14,689
172,439
33,089

purchased.”

of the balance sheet date.

(or amortized costs) and the balance sheet amounts.

income – Other operating expenses)

nonrecurring factors) + (Ordinary profit of equity-method affiliates x Ownership ratio) – Internal transactions (dividends, etc.)

SMFG 2008

SMFG 2008 27

3. Consolidated Capital Ratio

SMFG’s consolidated capital ratio as of March 31, 2008, was

other securities, which is an item directly credited to net assets,

10.56%, which was 0.75 percentage point lower than at March 31,

declined because of the drop in stock market prices, thus con-

2007.

tributing to the overall decline in total capital.

Total capital, which is the numerator in the capital ratio calcula-

Risk-adjusted assets, the denominator in the equation,

tion equation, amounted to ¥6,665.5 billion at fiscal year-end,

amounted to ¥63,117.3 billion, which was ¥2,577.0 billion higher

which was ¥187.1 billion lower than at the end of the previous fis-

than at the end of the previous fiscal year, owing to an increase in

cal year. Although retained earnings increased for the fiscal year

lending overseas and the merger of leasing companies.

as a result of the reporting of net income, net unrealized gains on

◆Consolidated Capital Ratio

March 31
Tier I capital ........................................................................................................................................
Tier II capital included as qualifying capital ........................................................................................
Deductions .........................................................................................................................................
Total capital ........................................................................................................................................
Risk-adjusted assets ..........................................................................................................................
Consolidated capital ratio ...................................................................................................................

2008 (A)
¥ 4,381,464
3,021,872
(737,792)
6,665,543
63,117,349
10.56%

Millions of yen

2007 (B)
¥ 3,903,257
3,640,226
(690,759)
6,852,723
60,540,346
11.31%

Increase (decrease)
(A) – (B)
¥ 478,207
(618,354)
(47,033)
(187,180)
2,577,003
(0.75%)

4. Dividend Policy

In view of the public nature of its business, SMFG has set a funda-

dend of ¥12,000 per share of common stock for the fiscal year

mental policy of increasing dividends stably and continuously

ended March 31, 2008, a year-on-year increase of ¥5,000. Annual

through sustainable growth in corporate value, while enhancing

dividends on preferred stocks were paid in the predetermined

the Group’s capital to maintain a sound financial position. By the

amounts for each category of preferred stock.

fiscal year ending March 31, 2010, the final year of its “LEAD THE

SMFG will employ its retained earnings to implement strategic

VALUE” medium-term management plan, SMFG is aiming for a

initiatives that will increase its corporate value. These initiatives will

dividend payout ratio of over 20% on a consolidated net income

be centered, first, on strengthening its position in targeted growth

basis.

business areas, and, second, on fortifying the Group’s business

Based on this policy, SMFG decided to pay a term-end divi-

platform for supporting sustainable growth.

5. Deferred Tax Assets

SMFG has adopted a conservative stance regarding the recogni-

fiscal year and amounted to ¥933.4 billion. The principal cause of

tion of deferred tax assets in consideration of the need to secure a

this increase in net deferred tax assets was a decline in net unreal-

sound financial position. During the fiscal year under review, net

ized gains on other securities because of the drop in stock market

deferred tax assets, which are deferred tax assets minus deferred

prices, which reduced deferred tax liabilities.

tax liabilities, increased ¥97.2 billion from the end of the previous

◆Deferred Tax Assets

March 31
Net deferred tax assets ......................................................................................................................
Net deferred tax assets / Tier I capital × 100 .....................................................................................

2008 (A)
¥933,481
21.3%

Millions of yen

2007 (B)
¥836,270
21.4%

Increase (decrease)
(A) – (B)

¥ 97,211
(0.1%)

Sumitomo Mitsui Banking Corporation (Nonconsolidated)

This section summarizes SMFG’s principal financial indicators
for the fiscal years ended March 31, 2008 and 2007, on a nonconsolidated basis.

1. Operating Results
Gross banking profit in fiscal 2007 increased ¥140.2 billion from

fiscal year under review, SMBC managed its portfolio to take

the previous year, to ¥1,484.7 billion, and expenses (excluding

advantage of movements in interest rates in Japan and overseas

nonrecurring losses) rose ¥61.2 billion, to ¥665.0 billion. As a con-

and reported a major increase in net trading income.

sequence, banking profit (before provision for general reserve for

possible loan losses) expanded ¥79.0 billion, to ¥819.6 billion.

Expenses

Ordinary profit, calculated by adjusting banking profit (before

Expenses (excluding nonrecurring losses) increased ¥61.2 billion,

provision for general reserve for possible loan losses) for non-

to ¥665.0 billion. Although the bank continued to implement mea-

recurring items, such as total credit cost and gains on stocks,

sures to improve efficiency in existing business activities and

declined ¥62.5 billion, to ¥510.7 billion.

conducted other activities to reduce costs, the principal cause of

After adjusting ordinary profit for extraordinary gains (losses)

this increase in expenses was a higher level of expenditures to

and income taxes, net income amounted to ¥205.7 billion, repre-

increase human resources in strategic businesses and overseas

senting a decline of ¥109.9 billion from the previous fiscal year.

offices as well as expenses used for increasing business promo-

2. Income Analysis
Gross Banking Profit

tion, developing new products, and other activities directed at

business expansion.

Gross banking profit increased ¥140.2 billion over the previous fis-

Banking Profit

cal year, to ¥1,484.7 billion. The principal reason for this increase

Banking profit (before provision for general reserve for possible

was an improvement in net trading income. Although in the previ-

loan losses) increased ¥79.0 billion from the previous fiscal year, to

ous year SMBC reported losses on the sale of bonds from its

¥819.6 billion.

portfolio, as it contracted its holdings to reduce risk, during the

◆Banking Profit

Year ended March 31
Gross banking profit ...........................................................................................................................
[Gross domestic banking profit] ...................................................................................................
[Gross international banking profit] ..............................................................................................
Net interest income ......................................................................................................................
Trust fees......................................................................................................................................
Net fees and commissions............................................................................................................
Net trading income .......................................................................................................................
Net other operating income (expenses) .......................................................................................
[Gross banking profit (excluding gains (losses) on bonds)] .........................................................
Expenses (excluding nonrecurring losses) ........................................................................................
Personnel expenses .....................................................................................................................
Nonpersonnel expenses...............................................................................................................
Taxes ............................................................................................................................................
Banking profit (before provision for general reserve for possible loan losses) ..................................

[Banking profit (before provision for general reserve for

2008 (A)
¥ 1,484,783
1,198,285
286,497
970,818
3,710
332,362
440,985
(263,093)
[1,514,841]
(665,091)
(211,681)
(413,317)
(40,092)
819,691

possible loan losses and gains (losses) on bonds)] ...................................................................
Provision for general reserve for possible loan losses .......................................................................
Banking profit .....................................................................................................................................

[849,750]
—
819,691

Millions of yen

2007 (B)
¥ 1,344,490
[1,149,941]
[194,548]
937,452
3,482
353,416
101,620
(51,482)
[1,456,903]
(603,888)
(190,630)
(378,240)
(35,017)
740,601

[853,015]
41,728
782,330

Increase (decrease)
(A) – (B)
¥ 140,293
48,344
91,949
33,366
228
(21,054)
339,365
(211,611)
[57,938]
(61,203)
(21,051)
(35,077)
(5,075)
79,090

[(3,265)]
(41,728)
37,361

For reference:
◆Banking Profit by Business Unit

Year ended March 31, 2008

Banking profit (before provision for

Consumer
Banking Unit

Middle Market
Banking Unit

Corporate
Banking Unit

International
Banking Unit

Treasury
Unit

Others

Total

Billions of yen

general reserve for possible loan losses) .....
Year-on-year increase (decrease) .................

¥169.3
+7.8

¥421.2
+1.1

¥155.6
(2.7)

¥81.5
+6.8

¥127.8
+93.8

¥(135.7)
(27.7)

¥819.6
+79.1

Notes: 1. Year-on-year comparisons are those used for internal reporting and exclude changes due to interest rate and foreign exchange rate fluctuations.

2. “Others” includes (1) financing costs on preferred securities and subordinated debt, (2) profit earned on investing the bank’s own capital, and (3) adjustment of inter-unit transactions.

SMFG 2008

SMFG 2008 29

3. Consolidated Capital Ratio

SMFG’s consolidated capital ratio as of March 31, 2008, was

other securities, which is an item directly credited to net assets,

10.56%, which was 0.75 percentage point lower than at March 31,

declined because of the drop in stock market prices, thus con-

2007.

tributing to the overall decline in total capital.

Total capital, which is the numerator in the capital ratio calcula-

Risk-adjusted assets, the denominator in the equation,

tion equation, amounted to ¥6,665.5 billion at fiscal year-end,

amounted to ¥63,117.3 billion, which was ¥2,577.0 billion higher

which was ¥187.1 billion lower than at the end of the previous fis-

than at the end of the previous fiscal year, owing to an increase in

cal year. Although retained earnings increased for the fiscal year

lending overseas and the merger of leasing companies.

as a result of the reporting of net income, net unrealized gains on

◆Consolidated Capital Ratio

2008 (A)
¥ 4,381,464
3,021,872
(737,792)
6,665,543
63,117,349
10.56%

Millions of yen

2007 (B)
¥ 3,903,257
3,640,226
(690,759)
6,852,723
60,540,346
11.31%

Increase (decrease)
(A) – (B)
¥ 478,207
(618,354)
(47,033)
(187,180)
2,577,003
(0.75%)

4. Dividend Policy

In view of the public nature of its business, SMFG has set a funda-

dend of ¥12,000 per share of common stock for the fiscal year

mental policy of increasing dividends stably and continuously

ended March 31, 2008, a year-on-year increase of ¥5,000. Annual

through sustainable growth in corporate value, while enhancing

dividends on preferred stocks were paid in the predetermined

the Group’s capital to maintain a sound financial position. By the

amounts for each category of preferred stock.

fiscal year ending March 31, 2010, the final year of its “LEAD THE

SMFG will employ its retained earnings to implement strategic

VALUE” medium-term management plan, SMFG is aiming for a

initiatives that will increase its corporate value. These initiatives will

dividend payout ratio of over 20% on a consolidated net income

be centered, first, on strengthening its position in targeted growth

basis.

business areas, and, second, on fortifying the Group’s business

Based on this policy, SMFG decided to pay a term-end divi-

platform for supporting sustainable growth.

5. Deferred Tax Assets

SMFG has adopted a conservative stance regarding the recogni-

fiscal year and amounted to ¥933.4 billion. The principal cause of

tion of deferred tax assets in consideration of the need to secure a

this increase in net deferred tax assets was a decline in net unreal-

sound financial position. During the fiscal year under review, net

ized gains on other securities because of the drop in stock market

deferred tax assets, which are deferred tax assets minus deferred

prices, which reduced deferred tax liabilities.

tax liabilities, increased ¥97.2 billion from the end of the previous

◆Deferred Tax Assets

2008 (A)
¥933,481
21.3%

Millions of yen

2007 (B)
¥836,270
21.4%

Increase (decrease)
(A) – (B)

¥ 97,211
(0.1%)

Sumitomo Mitsui Banking Corporation (Nonconsolidated)

This section summarizes SMFG’s principal financial indicators
for the fiscal years ended March 31, 2008 and 2007, on a nonconsolidated basis.

1. Operating Results
Gross banking profit in fiscal 2007 increased ¥140.2 billion from

fiscal year under review, SMBC managed its portfolio to take

the previous year, to ¥1,484.7 billion, and expenses (excluding

advantage of movements in interest rates in Japan and overseas

nonrecurring losses) rose ¥61.2 billion, to ¥665.0 billion. As a con-

and reported a major increase in net trading income.

sequence, banking profit (before provision for general reserve for

possible loan losses) expanded ¥79.0 billion, to ¥819.6 billion.

Expenses

Ordinary profit, calculated by adjusting banking profit (before

Expenses (excluding nonrecurring losses) increased ¥61.2 billion,

provision for general reserve for possible loan losses) for non-

to ¥665.0 billion. Although the bank continued to implement mea-

recurring items, such as total credit cost and gains on stocks,

sures to improve efficiency in existing business activities and

declined ¥62.5 billion, to ¥510.7 billion.

conducted other activities to reduce costs, the principal cause of

After adjusting ordinary profit for extraordinary gains (losses)

this increase in expenses was a higher level of expenditures to

and income taxes, net income amounted to ¥205.7 billion, repre-

increase human resources in strategic businesses and overseas

senting a decline of ¥109.9 billion from the previous fiscal year.

offices as well as expenses used for increasing business promo-

2. Income Analysis
Gross Banking Profit

tion, developing new products, and other activities directed at

business expansion.

Gross banking profit increased ¥140.2 billion over the previous fis-

Banking Profit

cal year, to ¥1,484.7 billion. The principal reason for this increase

Banking profit (before provision for general reserve for possible

was an improvement in net trading income. Although in the previ-

loan losses) increased ¥79.0 billion from the previous fiscal year, to

ous year SMBC reported losses on the sale of bonds from its

¥819.6 billion.

portfolio, as it contracted its holdings to reduce risk, during the

◆Banking Profit

[Banking profit (before provision for general reserve for

2008 (A)
¥ 1,484,783
1,198,285
286,497
970,818
3,710
332,362
440,985
(263,093)
[1,514,841]
(665,091)
(211,681)
(413,317)
(40,092)
819,691

[849,750]
—
819,691

Millions of yen

2007 (B)
¥ 1,344,490
[1,149,941]
[194,548]
937,452
3,482
353,416
101,620
(51,482)
[1,456,903]
(603,888)
(190,630)
(378,240)
(35,017)
740,601

[853,015]
41,728
782,330

Increase (decrease)
(A) – (B)
¥ 140,293
48,344
91,949
33,366
228
(21,054)
339,365
(211,611)
[57,938]
(61,203)
(21,051)
(35,077)
(5,075)
79,090

[(3,265)]
(41,728)
37,361

For reference:
◆Banking Profit by Business Unit

Year ended March 31, 2008

Banking profit (before provision for

Consumer
Banking Unit

Middle Market
Banking Unit

Corporate
Banking Unit

International
Banking Unit

Treasury
Unit

Others

Total

Billions of yen

general reserve for possible loan losses) .....
Year-on-year increase (decrease) .................

¥169.3
+7.8

¥421.2
+1.1

¥155.6
(2.7)

¥81.5
+6.8

¥127.8
+93.8

¥(135.7)
(27.7)

¥819.6
+79.1

Notes: 1. Year-on-year comparisons are those used for internal reporting and exclude changes due to interest rate and foreign exchange rate fluctuations.

2. “Others” includes (1) financing costs on preferred securities and subordinated debt, (2) profit earned on investing the bank’s own capital, and (3) adjustment of inter-unit transactions.

SMFG 2008

SMFG 2008 29

Nonrecurring Gains (Losses) (Credit Cost, etc.)

Ordinary Profit

Nonrecurring losses amounted to ¥308.9 billion, which was ¥99.9

As a result of the foregoing, ordinary profit totaled ¥510.7 billion,

billion higher than for the previous fiscal year. Although the item

¥62.5 billion lower than in the previous fiscal year.

“Others” among nonrecurring losses showed an improvement of

¥75.5 billion from the previous fiscal year due to a substantial

Extraordinary Gains (Losses)

reduction in the provision to the general reserve for possible losses

Net extraordinary losses amounted to ¥3.2 billion, which repre-

on investments, the bank reported write-offs related to equities and

sented a deterioration of ¥16.8 billion from the amount of

others as a result of the decline in stock prices, and net gains on

extraordinary gains reported in the prior year.

stocks declined ¥152.1 billion, to ¥141.0 billion.

Please note that total credit cost—which is the combined total

Net Income

of credit cost of ¥155.0 billion recorded under “Nonrecurring gains

Current income taxes amounted to ¥16.0 billion, and deferred

(losses),” the provision for general reserve for possible loan losses,

income taxes were ¥285.6 billion. As a result, net income

and gains on the collection of written-off claims—amounted to

decreased ¥109.9 billion, to ¥205.7 billion.

¥147.7 billion, which was ¥58.2 billion higher than in the previous

fiscal year.

◆Ordinary Profit and Net Income

Year ended March 31
Banking profit (before provision for general reserve for possible loan losses) ..................................
Provision for general reserve for possible loan losses (A) .................................................................
Banking profit .....................................................................................................................................
Nonrecurring gains (losses) ...............................................................................................................
Credit cost (B) ..............................................................................................................................
Net gains on stocks ......................................................................................................................
Gains on sale of stocks ..........................................................................................................
Losses on sale of stocks ........................................................................................................
Losses on devaluation of stocks ............................................................................................
Others ..........................................................................................................................................
Ordinary profit ....................................................................................................................................
Extraordinary gains (losses) ..............................................................................................................
Losses on disposal of fixed assets ...............................................................................................
Losses on impairment of fixed assets ..........................................................................................
Reversal of reserve for possible loan losses (C) ..........................................................................
Gains on collection of written-off claims (D) .................................................................................
Gains on return of securities from retirement benefits trust .........................................................
Losses on liquidation of subsidiary...............................................................................................

Income taxes:

Total credit cost (A) + (B) + (C) + (D) ................................................................................................
Provision for general reserve for possible loan losses .................................................................
Write-off of loans ..........................................................................................................................
Provision for specific reserve for possible loan losses .................................................................
Losses on sales of delinquent loans ............................................................................................
Provision for loan loss reserve for specific overseas countries ....................................................
Gains on collection of written-off claims .......................................................................................

2008 (A)
¥ 819,691
—
819,691
(308,952)
(155,011)
(141,002)
26,718
(2,311)
(165,409)
(12,937)
510,739
(3,284)
(5,849)
(4,700)
7,238
7
—
—

(16,031)
(285,680)
¥ 205,742

¥(147,765)
96,900
(121,801)
(91,603)
(33,209)
1,941
7

Millions of yen

2007 (B)

¥ 740,601
41,728
782,330
(209,017)
(131,676)
11,098
50,204
(546)
(38,559)
(88,439)
573,313
13,615
(1,680)
(3,680)
—
455
36,330
(17,809)

(16,507)
(254,680)
¥ 315,740

¥ (89,491)
41,728
(50,468)
(44,358)
(37,262)
412
455

Increase (decrease)
(A) – (B)
¥ 79,090
(41,728)
37,361
(99,935)
(23,335)
(152,100)
(23,486)
(1,765)
(126,850)
75,502
(62,574)
(16,899)
(4,169)
(1,020)
7,238
(448)
(36,330)
17,809

476
(31,000)
¥(109,998)

¥ (58,274)
55,172
(71,333)
(47,245)
4,053
1,529
(448)

3. Assets, Liabilities and Net Assets
Assets

Liabilities

SMBC’s assets as of March 31, 2008, were ¥100,033.0 billion,

Liablities as of March 31, 2008, amounted to ¥96,539.7 billion, rep-

which was ¥8,495.7 billion higher than at March 31, 2007. The

resenting an increase of ¥8,995.4 billion from the previous fiscal

principal reasons for this rise in assets were an increase in

year-end. This rise was primarily due to the increase in funds

securities of ¥2,697.3 billion and an increase in loans outstanding

raised in connection with expansion in the bank’s asset portfolio.

of ¥3,201.3 billion, mainly in loans made in overseas markets. In

the previous fiscal year, the bank took steps to improve its asset

Net Assets

portfolio by reducing the volume of interest rate risk. During the

Net assets at fiscal year-end amounted to ¥3,493.2 billion. Of this

fiscal year under review, the bank adopted a policy of restoring

total, stockholders’ equity amounted to ¥2,927.3 billion, consisting

its risk volume within the scope of controllable levels, thus leading

of ¥664.9 billion in capital stock, ¥1,367.5 billion in capital surplus

to a higher balance of assets at fiscal year-end.

(including ¥702.5 billion in other capital surplus), and ¥894.8 bil-

In addition, the balance of problem assets based on the Finan-

lion in retained earnings.

cial Reconstruction Law rose ¥65.2 billion from the end of the

Valuation and translation adjustments were ¥565.8 billion,

previous fiscal year, to ¥803.9 billion. The principal factors leading
to this increase were a rise in subprime loan related assets that

which included ¥558.1 billion in net unrealized gains on other
securities, ¥13.7 billion in deferred losses on hedges, and

required provisions for possible loan losses and the deterioration

¥21.5 billion in land revaluation excess.

of the operating and financial positions of certain obligors, which

led to a decline in their obligor grades. However, the problem

asset ratio remained at a relatively low 1.24%.

◆Assets, Liabilities and Net Assets

March 31
Assets ................................................................................................................................................
Securities .....................................................................................................................................
Loans and bills discounted ...........................................................................................................
Liabilities ............................................................................................................................................
Deposits .......................................................................................................................................
Negotiable certificates of deposit .................................................................................................
Net Assets ..........................................................................................................................................

2008 (A)
¥100,033,020
22,758,241
56,957,813
96,539,771
66,417,260
2,965,574
3,493,249

Millions of yen

2007 (B)
¥91,537,228
20,060,873
53,756,440
87,544,344
66,235,002
2,574,335
3,992,884

Increase (decrease)
(A) – (B)
¥8,495,792
2,697,368
3,201,373
8,995,427
182,258
391,239
(499,635)

SMFG 2008

SMFG 2008 31

Nonrecurring Gains (Losses) (Credit Cost, etc.)

Ordinary Profit

Nonrecurring losses amounted to ¥308.9 billion, which was ¥99.9

As a result of the foregoing, ordinary profit totaled ¥510.7 billion,

billion higher than for the previous fiscal year. Although the item

¥62.5 billion lower than in the previous fiscal year.

“Others” among nonrecurring losses showed an improvement of

¥75.5 billion from the previous fiscal year due to a substantial

Extraordinary Gains (Losses)

reduction in the provision to the general reserve for possible losses

Net extraordinary losses amounted to ¥3.2 billion, which repre-

on investments, the bank reported write-offs related to equities and

sented a deterioration of ¥16.8 billion from the amount of

others as a result of the decline in stock prices, and net gains on

extraordinary gains reported in the prior year.

stocks declined ¥152.1 billion, to ¥141.0 billion.

Please note that total credit cost—which is the combined total

Net Income

of credit cost of ¥155.0 billion recorded under “Nonrecurring gains

Current income taxes amounted to ¥16.0 billion, and deferred

(losses),” the provision for general reserve for possible loan losses,

income taxes were ¥285.6 billion. As a result, net income

and gains on the collection of written-off claims—amounted to

decreased ¥109.9 billion, to ¥205.7 billion.

¥147.7 billion, which was ¥58.2 billion higher than in the previous

fiscal year.

◆Ordinary Profit and Net Income

Income taxes:

2008 (A)
¥ 819,691
—
819,691
(308,952)
(155,011)
(141,002)
26,718
(2,311)
(165,409)
(12,937)
510,739
(3,284)
(5,849)
(4,700)
7,238
7
—
—

(16,031)
(285,680)
¥ 205,742

¥(147,765)
96,900
(121,801)
(91,603)
(33,209)
1,941
7

Millions of yen

2007 (B)

¥ 740,601
41,728
782,330
(209,017)
(131,676)
11,098
50,204
(546)
(38,559)
(88,439)
573,313
13,615
(1,680)
(3,680)
—
455
36,330
(17,809)

(16,507)
(254,680)
¥ 315,740

¥ (89,491)
41,728
(50,468)
(44,358)
(37,262)
412
455

Increase (decrease)
(A) – (B)
¥ 79,090
(41,728)
37,361
(99,935)
(23,335)
(152,100)
(23,486)
(1,765)
(126,850)
75,502
(62,574)
(16,899)
(4,169)
(1,020)
7,238
(448)
(36,330)
17,809

476
(31,000)
¥(109,998)

¥ (58,274)
55,172
(71,333)
(47,245)
4,053
1,529
(448)

3. Assets, Liabilities and Net Assets
Assets

Liabilities

SMBC’s assets as of March 31, 2008, were ¥100,033.0 billion,

Liablities as of March 31, 2008, amounted to ¥96,539.7 billion, rep-

which was ¥8,495.7 billion higher than at March 31, 2007. The

resenting an increase of ¥8,995.4 billion from the previous fiscal

principal reasons for this rise in assets were an increase in

year-end. This rise was primarily due to the increase in funds

securities of ¥2,697.3 billion and an increase in loans outstanding

raised in connection with expansion in the bank’s asset portfolio.

of ¥3,201.3 billion, mainly in loans made in overseas markets. In

the previous fiscal year, the bank took steps to improve its asset

Net Assets

portfolio by reducing the volume of interest rate risk. During the

Net assets at fiscal year-end amounted to ¥3,493.2 billion. Of this

fiscal year under review, the bank adopted a policy of restoring

total, stockholders’ equity amounted to ¥2,927.3 billion, consisting

its risk volume within the scope of controllable levels, thus leading

of ¥664.9 billion in capital stock, ¥1,367.5 billion in capital surplus

to a higher balance of assets at fiscal year-end.

(including ¥702.5 billion in other capital surplus), and ¥894.8 bil-

In addition, the balance of problem assets based on the Finan-

lion in retained earnings.

cial Reconstruction Law rose ¥65.2 billion from the end of the

Valuation and translation adjustments were ¥565.8 billion,

previous fiscal year, to ¥803.9 billion. The principal factors leading
to this increase were a rise in subprime loan related assets that

which included ¥558.1 billion in net unrealized gains on other
securities, ¥13.7 billion in deferred losses on hedges, and

required provisions for possible loan losses and the deterioration

¥21.5 billion in land revaluation excess.

of the operating and financial positions of certain obligors, which

led to a decline in their obligor grades. However, the problem

asset ratio remained at a relatively low 1.24%.

◆Assets, Liabilities and Net Assets

March 31
Assets ................................................................................................................................................
Securities .....................................................................................................................................
Loans and bills discounted ...........................................................................................................
Liabilities ............................................................................................................................................
Deposits .......................................................................................................................................
Negotiable certificates of deposit .................................................................................................
Net Assets ..........................................................................................................................................

2008 (A)
¥100,033,020
22,758,241
56,957,813
96,539,771
66,417,260
2,965,574
3,493,249

Millions of yen

2007 (B)
¥91,537,228
20,060,873
53,756,440
87,544,344
66,235,002
2,574,335
3,992,884

Increase (decrease)
(A) – (B)
¥8,495,792
2,697,368
3,201,373
8,995,427
182,258
391,239
(499,635)

SMFG 2008

SMFG 2008 31

4. Unrealized Gains (Losses) on Securities

Net unrealized gains on securities as of March 31, 2008,

trust”—which is directly credited to net assets—decreased

amounted to ¥773.8 billion, which represented a decrease of

¥1,077.4 billion, to ¥755.7 billion.

¥1,054.2 billion from the previous fiscal year-end. Net unrealized

gains on other securities, including “other money held in

◆Unrealized Gains (Losses) on Securities

2008

Millions of yen

March 31

Net unrealized
gains (losses) (A)

Held-to-maturity securities .............................
Stocks of subsidiaries and affiliates ...............
Other securities .............................................
Stocks ......................................................
Bonds ......................................................
Others ......................................................
Other money held in trust...............................
Total ...............................................................
Stocks ......................................................
Bonds ......................................................
Others ......................................................

¥ 17,075
1,054
755,749
936,324
(129,508)
(51,067)
(29)
773,849
937,378
(112,432)
(51,096)

(A) – (B)

¥ 30,139
(6,904)
(1,077,142)
(1,042,425)
21,936
(56,654)
(351)
(1,054,258)
(1,049,329)
52,258
(57,186)

Unrealized
gains

¥ 18,373
14,885
1,030,778
992,665
15,579
22,533
—
1,064,037
1,007,551
33,952
22,533

Unrealized
losses

Net unrealized
gains (losses) (B)

¥ 1,298
13,831
275,029
56,341
145,087
73,600
29
290,188
70,172
146,385
73,630

¥ (13,064)
7,958
1,832,891
1,978,749
(151,444)
5,587
322
1,828,107
1,986,707
(164,690)
6,090

2007
Unrealized
gains

¥ 200
85,505
2,028,694
1,990,476
748
37,469
322
2,114,723
2,075,981
768
37,972

Unrealized
losses

¥ 13,265
77,547
195,802
11,727
152,193
31,882
—
286,615
89,274
165,458
31,882

Notes: 1. The figures above include unrealized gains (losses) on negotiable certificates of deposit in “Cash and due from banks” and “Deposits with banks” as well as beneficiary claims on loan trusts and commodity

investment trusts in “Commercial paper and other debt purchased.”

2. Unrealized gains (losses) on stocks (excluding stocks of subsidiaries and affiliates) are calculated using the average market prices during the final month of the respective reporting period. The remainder of the

securities are valued at the market price as of the balance sheet date.

3. “Other securities” and “Other money held in trust” are valued and recorded on the balance sheet at market prices. The figures in the table above indicate the differences between the acquisition costs

(or amortized costs) and the balance sheet amounts.

The Group's Exposure of Securitized Products (Sumitomo Financial Group (Consolidated))

The figures contained in this section have been compiled for in-house management purposes and are as of March 31, 2008. Figures for the reserve for possible loan
losses do not include provisions to the general reserve for normal borrowers.

1. Securitized products
As of March 31,2008, the Group held approximately ¥270 billion in

We substantially reduced subprime-related exposure to

approximately ¥5.5 billion after write-offs and provisions. The

securitized products after write-offs and provisions, mostly to Gov-

amount of loss from the reduction was approximately ¥93 billion

ernment Sponsored Enterprises (“GSE”) etc. with high credit ratings

(¥89.1 billion) of provisions and write-offs and loss on sale of ¥3.9

of approximately ¥220 billion.

billion.

(Consolidated)

Balances
(before write-offs)*
1(a.)

Overseas

Subprime-related

Net unrealized
gains / losses
(before write-offs)

Provisions
and
write-offs (b.)

Balances
(after provisions
and write-offs)(a.-b.)

Subprime-related

Overseas

Subprime-related

March 31, 2008

(Billions of yen)

Net unrealized
gains /losses
(after write-offs)

Subprime-related

Ratings of
underlying assets,
etc.

RMBS

¥219.8

¥ —

¥ (1.6)

¥ —

¥ — ¥219.8

¥219.8

¥ —

¥(1.6)

¥—

Guaranteed by GSE etc.

219.8

Cards

CLO

Senior (*4)

Equity

CMBS

ABS-CDO

Senior (*4)

Mezzanine (*5)

Equity

12.5

24.3

22.0

2.3

6.0

12.5

24.3

22.0

2.3

—

(1.6)

(0.6)

(3.4)

(2.4)

(1.0)

—

0.4

—

0.4

—

73.5

(68.6)

68.6

66.1

(61.2)

61.2

5.3

2.1

5.3

2.1

5.3

(5.3)

5.3

(2.1)

¥(74.2)

2.1

73.5

21.1

2.1

69.0

28.9

2.1

68.6

20.5

Investments to securitized products (A)

336.1

330.1

Warehousing loans, etc. (B)

35.4

219.8

12.5

23.9

22.0

1.9

6.0

4.9

—

12.5

23.9

22.0

1.9

—

4.9

—

267.1

261.1

6.5

—

4.9

—

4.9

0.6

(1.6)

(0.6)

(3.0)

(2.4)

(0.6)

—

— AAA

— A 〜 BBB

—

— AAA 〜 A

— No ratings

— BBB

—

Speculative
ratings

Speculative

— ratings,

No ratings

— No ratings

¥(5.2)

¥—

Total (A+B)

¥371.5

¥365.5

¥94.6

¥97.9

¥89.1

¥273.6

¥267.6

¥5.5

Notes: 1. These figures do not include the subordinated beneficiary claims (Please refer to the next page for related figures) held by SMBC in the process of liquidating loan assets.

2. The senior debt portion is the part classified in the top tranching positions with ratings of A or higher at the time of securitization. (Tranching is the establishment of a structure according to debt seniority, from

senior to subordinated debt.)

3. The mezzanine portion is the part after the exclusion of both the senior portion and the portion lowest in seniority (equity).
4. Warehousing loans are loans made based on collateral consisting of securitized investment products held by a special-purpose company established for the purpose of securitization.
5. Ratings shown are the lower of those issued by Standard & Poor’s and Moody’s Investors Service. Ratings are shown in the ranking employed by Standard & Poor’s.
6. The Group held no asset-backed commercial paper (ABCP) as of the date.

SMFG 2008

SMFG 2008 33

4. Unrealized Gains (Losses) on Securities

Net unrealized gains on securities as of March 31, 2008,

trust”—which is directly credited to net assets—decreased

amounted to ¥773.8 billion, which represented a decrease of

¥1,077.4 billion, to ¥755.7 billion.

¥1,054.2 billion from the previous fiscal year-end. Net unrealized

gains on other securities, including “other money held in

◆Unrealized Gains (Losses) on Securities

2008

Millions of yen

March 31

Net unrealized
gains (losses) (A)

¥ 17,075
1,054
755,749
936,324
(129,508)
(51,067)
(29)
773,849
937,378
(112,432)
(51,096)

(A) – (B)

¥ 30,139
(6,904)
(1,077,142)
(1,042,425)
21,936
(56,654)
(351)
(1,054,258)
(1,049,329)
52,258
(57,186)

Unrealized
gains

¥ 18,373
14,885
1,030,778
992,665
15,579
22,533
—
1,064,037
1,007,551
33,952
22,533

Unrealized
losses

Net unrealized
gains (losses) (B)

¥ 1,298
13,831
275,029
56,341
145,087
73,600
29
290,188
70,172
146,385
73,630

¥ (13,064)
7,958
1,832,891
1,978,749
(151,444)
5,587
322
1,828,107
1,986,707
(164,690)
6,090

2007
Unrealized
gains

¥ 200
85,505
2,028,694
1,990,476
748
37,469
322
2,114,723
2,075,981
768
37,972

Unrealized
losses

¥ 13,265
77,547
195,802
11,727
152,193
31,882
—
286,615
89,274
165,458
31,882

investment trusts in “Commercial paper and other debt purchased.”

securities are valued at the market price as of the balance sheet date.

(or amortized costs) and the balance sheet amounts.

The Group's Exposure of Securitized Products (Sumitomo Financial Group (Consolidated))

1. Securitized products
As of March 31,2008, the Group held approximately ¥270 billion in

We substantially reduced subprime-related exposure to

approximately ¥5.5 billion after write-offs and provisions. The

securitized products after write-offs and provisions, mostly to Gov-

amount of loss from the reduction was approximately ¥93 billion

ernment Sponsored Enterprises (“GSE”) etc. with high credit ratings

(¥89.1 billion) of provisions and write-offs and loss on sale of ¥3.9

of approximately ¥220 billion.

billion.

(Consolidated)

Balances
(before write-offs)*
1(a.)

Overseas

Subprime-related

Net unrealized
gains / losses
(before write-offs)

Provisions
and
write-offs (b.)

Balances
(after provisions
and write-offs)(a.-b.)

Subprime-related

Overseas

Subprime-related

March 31, 2008

(Billions of yen)

Net unrealized
gains /losses
(after write-offs)

Subprime-related

Ratings of
underlying assets,
etc.

RMBS

¥219.8

¥ —

¥ (1.6)

¥ —

¥ — ¥219.8

¥219.8

¥ —

¥(1.6)

¥—

Guaranteed by GSE etc.

219.8

Cards

CLO

Senior (*4)

Equity

CMBS

ABS-CDO

Senior (*4)

Mezzanine (*5)

Equity

12.5

24.3

22.0

2.3

6.0

12.5

24.3

22.0

2.3

—

(1.6)

(0.6)

(3.4)

(2.4)

(1.0)

—

0.4

—

0.4

—

73.5

(68.6)

68.6

66.1

(61.2)

61.2

5.3

2.1

5.3

2.1

5.3

(5.3)

5.3

(2.1)

¥(74.2)

2.1

73.5

21.1

2.1

69.0

28.9

2.1

68.6

20.5

Investments to securitized products (A)

336.1

330.1

Warehousing loans, etc. (B)

35.4

219.8

12.5

23.9

22.0

1.9

6.0

4.9

—

12.5

23.9

22.0

1.9

—

4.9

—

267.1

261.1

6.5

—

4.9

—

4.9

0.6

(1.6)

(0.6)

(3.0)

(2.4)

(0.6)

—

— AAA

— A 〜 BBB

—

— AAA 〜 A

— No ratings

— BBB

—

Speculative
ratings

Speculative

— ratings,

No ratings

— No ratings

¥(5.2)

¥—

Total (A+B)

¥371.5

¥365.5

¥94.6

¥97.9

¥89.1

¥273.6

¥267.6

¥5.5

Notes: 1. These figures do not include the subordinated beneficiary claims (Please refer to the next page for related figures) held by SMBC in the process of liquidating loan assets.

senior to subordinated debt.)

SMFG 2008

SMFG 2008 33

(Reference) Subordinated beneficiaries in securitization of SMBC’s loans

SMBC holds a part of its securitized loan receivables as subordi-

nated beneficiaries.

As of March 31, 2008, SMBC held approximately ¥250 billion

in those subordinated beneficiaries. Most of the securitized

assets are domestic residential mortgage loans with low default

rates. SMBC properly conducts self-assessment and has made

the necessary write-offs and provisions for the subordinated

beneficiaries. No subsidiary other than SMBC has those subordi-

nated beneficiaries mentioned above.

Receivables of
residential mortgage loans

Receivables of
loans to corporations

Total

Balance

¥245.5

7.9

¥253.4

(Billions of yen)

March 31, 2008

Overseas

Subprime-related

Loan loss
reserve

¥—

—

¥—

—

¥—

¥ —

1.5

¥1.5

2. Transactions with Monoline Insurance Companies

Monoline insurance companies guarantee payment on underlying
or reference assets. Our recognition of profit or loss on the transac-

rated investment grade or equivalent, and do not include
subprime-related assets.

tons with monoline insurance companies is basically affected by

We conduct self-assessment to these exposures and, in the

the credit conditions and prices of underlying or reference assets,

fiscal year ended March 31, 2008, due to the substantial deteriora-

and is also affected by the credit conditions of monoline insurance

tion in creditworthiness of certain monoline insurance companies,

companies.

we made loss provisions for the entire amount of the exposure to

these companies and conducted a series of transactions (realized

Credit derivatives (Credit Default Swap [CDS*]) transactions with

loss of approximately ¥30 billion) to set the upper limit of a loss

monoline insurance companies

amount associated with the exposure amount in order to avoid any

In CDS brokerage transactions, positions are covered through

additional losses.

transactions with monoline insurance companies. As of March 31,

2008, the Group’s exposure** to monoline insurance companies,

all with high credit ratings, after loss provision totaled approxi-

mately ¥30 billion. Reference assets of these CDS transactions are

(Consolidated)

* Derivatives to hedge credit risks.
** Mark-to-market value claimable to monoline insurance companies for net

loss of reference assets on the settlement

March 31, 2008

Net exposure

Loan loss reserve

(Billions of yen)
(Billions of yen)

Amount of reference assets
As of Mar. 31

Exposure to CDS transactions with monoline insurance companies

¥31.1

¥1.9

¥559.1

Notes: 1. Excluding figures related to the portion to which losses (¥30 billion) have been realized through write-off

2. The credit ratings of counterparty monoline insurance companies (excluding those to which losses have been realized) are equal to or above AA, most of them are rated AAA by S&P or Moody's.

Loans and investments guaranteed by monoline insurance companies, etc.

As of March 31, 2008, the Group held approximately ¥40 billion of

exposure in loans and investments guaranteed by monoline insur-

(Consolidated)

ance companies.

Underlying assets are those of project finance and local

government bonds rated investment grade or equivalent, and

include no subprime-related assets. We conduct self-assessment

on these loans and investments.

Loans and investments guaranteed or
insured by monoline insurance companies

Reference: In addition, we had approximately ¥16 billion in commitment contracts (drawn down amount:
¥10 million) to insurance companies with monoline insurance companies as Group members.
There are no indications so far that the creditworthiness of these insurance companies are at
issue.

(Billions of yen)

March 31, 2008

Balance

Loss provisions

¥41.7

¥—

3. Leveraged Loans

As of March 31, 2008, the Group’s balance of financing for

borrowers, and, diversify the exposure especially for overseas

mergers and acquisitions of whole or part of companies was

portfolio in order to reduce concentration risk. At the same time,

approximately ¥840 billion and undrawn commitments for them

in credit risk management, we monitor each of such transactions

was approximately ¥120 billion.

individually, making loss provisions properly, thereby maintaining

In providing loans and commitment lines for mergers and

the quality of both domestic and overseas portfolios.

acquisitions, we carefully scrutinize stability of cash flow of the

(Consolidated)

Europe

Japan

United States

Asia (excluding Japan)

Total

Loans

March 31, 2008

Undrawn commitments

Loss provisions

(Billions of yen)

¥325.4

232.3

195.4

89.6

¥842.7

¥ 11.0

17.9

81.2

8.0

¥118.1

—

¥13.7

1.3

0.5

¥15.5

Notes: 1. Above figures include the amount to be sold of approximately ¥80 billion. Loss on sales is expected to be below 10% to its face value, currently.
2. Above figures do not include leveraged loans which are underlying assets included in securitized products exposure shown on page 33.

4. Asset Backed Commercial Paper (ABCP) Programs as Sponsor

The Group sponsors issuance of ABCPs, whose reference assets

As of March 31, 2008, the total notional amount of reference

are such as clients' receivables or other claims, in order to fulfill

assets of sponsored ABCP programs was approximately ¥960 bil-

clients' financing needs. Specifically, as a sponsor, we provide ser-

lion. Most of the reference assets are high-grade claims of

vices to special purpose vehicles, which are set up for clients'

corporate clients and do not include subprime loan related assets.

financing needs, for purchase of claims, financing, issuance and

In addition, regarding the exposure of liquidity and credit supports,

sales of ABCPs. We also provide liquidity and credit supports for

we properly conduct self-assessment, making provisions and

such special purpose vehicles.

write-offs properly.

March 31, 2008

Support for programs

(Billions of yen)

Types of reference assets

Notional amount of
reference assets

Overseas

Subprime-related

Loss provisions

Liquidity support

Credit support

Claims on corporations

Claims on financial institutions

Retail loan claims

Other claims

Total

¥828.6

¥192.3

65.4

40.1

25.1

2.1

—

40.1

25.1

2.1

¥961.3

¥259.6

¥—

—

¥—

¥0.1

—

¥0.1

yes

Note:The maximum amount of credit supports provided for overseas ABCP program is limited to 10% of the balance of reference assets. On the other hand, the maximum amount of credit supports provided for domestic

ABCP programs are limited to the balance of 100% of reference assets.

Reference:In addition, we provide liquidity and credit supports for ABCP programs which are sponsored by other banks. Total national amount of reference assets of such programs are approximately ¥110 billion.

5. Other
SMFG has no securities issued by Structured Investment Vehicles.

SMFG 2008

SMFG 2008 35

(Reference) Subordinated beneficiaries in securitization of SMBC’s loans

SMBC holds a part of its securitized loan receivables as subordi-

nated beneficiaries.

As of March 31, 2008, SMBC held approximately ¥250 billion

in those subordinated beneficiaries. Most of the securitized

assets are domestic residential mortgage loans with low default

rates. SMBC properly conducts self-assessment and has made

the necessary write-offs and provisions for the subordinated

beneficiaries. No subsidiary other than SMBC has those subordi-

nated beneficiaries mentioned above.

Receivables of
residential mortgage loans

Receivables of
loans to corporations

Total

Balance

¥245.5

7.9

¥253.4

(Billions of yen)

March 31, 2008

Overseas

Subprime-related

Loan loss
reserve

¥—

—

¥—

—

¥—

¥ —

1.5

¥1.5

2. Transactions with Monoline Insurance Companies

Monoline insurance companies guarantee payment on underlying
or reference assets. Our recognition of profit or loss on the transac-

rated investment grade or equivalent, and do not include
subprime-related assets.

tons with monoline insurance companies is basically affected by

We conduct self-assessment to these exposures and, in the

the credit conditions and prices of underlying or reference assets,

fiscal year ended March 31, 2008, due to the substantial deteriora-

and is also affected by the credit conditions of monoline insurance

tion in creditworthiness of certain monoline insurance companies,

companies.

we made loss provisions for the entire amount of the exposure to

these companies and conducted a series of transactions (realized

Credit derivatives (Credit Default Swap [CDS*]) transactions with

loss of approximately ¥30 billion) to set the upper limit of a loss

monoline insurance companies

amount associated with the exposure amount in order to avoid any

In CDS brokerage transactions, positions are covered through

additional losses.

transactions with monoline insurance companies. As of March 31,

2008, the Group’s exposure** to monoline insurance companies,

all with high credit ratings, after loss provision totaled approxi-

mately ¥30 billion. Reference assets of these CDS transactions are

(Consolidated)

* Derivatives to hedge credit risks.
** Mark-to-market value claimable to monoline insurance companies for net

loss of reference assets on the settlement

March 31, 2008

Net exposure

Loan loss reserve

(Billions of yen)
(Billions of yen)

Amount of reference assets
As of Mar. 31

Exposure to CDS transactions with monoline insurance companies

¥31.1

¥1.9

¥559.1

Notes: 1. Excluding figures related to the portion to which losses (¥30 billion) have been realized through write-off

2. The credit ratings of counterparty monoline insurance companies (excluding those to which losses have been realized) are equal to or above AA, most of them are rated AAA by S&P or Moody's.

Loans and investments guaranteed by monoline insurance companies, etc.

As of March 31, 2008, the Group held approximately ¥40 billion of

exposure in loans and investments guaranteed by monoline insur-

(Consolidated)

ance companies.

Underlying assets are those of project finance and local

government bonds rated investment grade or equivalent, and

include no subprime-related assets. We conduct self-assessment

on these loans and investments.

Loans and investments guaranteed or
insured by monoline insurance companies

(Billions of yen)

March 31, 2008

Balance

Loss provisions

¥41.7

¥—

3. Leveraged Loans

As of March 31, 2008, the Group’s balance of financing for

borrowers, and, diversify the exposure especially for overseas

mergers and acquisitions of whole or part of companies was

portfolio in order to reduce concentration risk. At the same time,

approximately ¥840 billion and undrawn commitments for them

in credit risk management, we monitor each of such transactions

was approximately ¥120 billion.

individually, making loss provisions properly, thereby maintaining

In providing loans and commitment lines for mergers and

the quality of both domestic and overseas portfolios.

acquisitions, we carefully scrutinize stability of cash flow of the

(Consolidated)

Europe

Japan

United States

Asia (excluding Japan)

Total

Loans

March 31, 2008

Undrawn commitments

Loss provisions

(Billions of yen)

¥325.4

232.3

195.4

89.6

¥842.7

¥ 11.0

17.9

81.2

8.0

¥118.1

—

¥13.7

1.3

0.5

¥15.5

4. Asset Backed Commercial Paper (ABCP) Programs as Sponsor

The Group sponsors issuance of ABCPs, whose reference assets

As of March 31, 2008, the total notional amount of reference

are such as clients' receivables or other claims, in order to fulfill

assets of sponsored ABCP programs was approximately ¥960 bil-

clients' financing needs. Specifically, as a sponsor, we provide ser-

lion. Most of the reference assets are high-grade claims of

vices to special purpose vehicles, which are set up for clients'

corporate clients and do not include subprime loan related assets.

financing needs, for purchase of claims, financing, issuance and

In addition, regarding the exposure of liquidity and credit supports,

sales of ABCPs. We also provide liquidity and credit supports for

we properly conduct self-assessment, making provisions and

such special purpose vehicles.

write-offs properly.

March 31, 2008

Support for programs

(Billions of yen)

Types of reference assets

Notional amount of
reference assets

Overseas

Subprime-related

Loss provisions

Liquidity support

Credit support

Claims on corporations

Claims on financial institutions

Retail loan claims

Other claims

Total

¥828.6

¥192.3

65.4

40.1

25.1

2.1

—

40.1

25.1

2.1

¥961.3

¥259.6

¥—

—

¥—

¥0.1

—

¥0.1

yes

ABCP programs are limited to the balance of 100% of reference assets.

5. Other
SMFG has no securities issued by Structured Investment Vehicles.

SMFG 2008

SMFG 2008 35

Risk Management

Basic Approach
Financial and economic deregulation, globalization, and advances

categories are constantly reviewed, and new categories may be

added in response to changes in the operating environment. The

Risk Management System
Top management plays an active role in determining SMFG’s

Risk Capital-Based Management
(1) Framework

in IT are generating new business opportunities for financial institu-

Corporate Risk Management Department works with the Corporate

Groupwide basic policies for risk management. The system works

In order to maintain a balance between risk and return as well as

tions. The risks accompanying these new business opportunities

Planning Department to comprehensively and systematically man-

as follows: The basic policies for risk management are determined

ensure the soundness of the Group from an overall perspective,

are not only increasing in number but also growing in diversity and

age all these categories of risk across the entire Group.

by the Management Committee before being authorized by the

we employ the risk capital-based management method. We mea-

complexity. Accordingly, identifying, measuring, and controlling

Board. The Management Committee, the designated Board mem-

sure “risk capital” based on value at risk (VaR), etc. as a uniform

risks have never been more important in the management of a

(2) Fundamental Principles and Basic Policies for Risk Management

bers, and the relevant risk management departments perform risk

basic measure of credit, market, and operational risks, taking

financial holding company.

SMFG’s Groupwide basic policies for risk management stipulate

management according to the basic policies.

account of the special characteristics of each type of risk and the

SMFG has encapsulated the basic principles to be employed

the fundamental principles for risk management that must be fol-

Risk management systems are in place at the individual Group

business activities of each Group company. We then allocate capi-

in risk management in the manual entitled Regulations on Risk

lowed, and spell out risk management procedures from various

companies in accordance with SMFG’s Groupwide basic policies

tal appropriately and effectively to each unit to keep total exposure

Management. In the manual, we have specified the basic policies

perspectives. These include managing risk on a consolidated

for risk management. For example, at SMBC, specific departments

to various risks within the scope of our resources, i.e., capital. In

for risk management: 1) Set forth SMFG’s Groupwide basic poli-

accounting basis, managing risk using quantification methods,

have been appointed to oversee the handling of the four risk cate-

this framework, risk capital includes credit concentration risk and

cies for risk management after specifying the categories of risk to

ensuring consistency with business strategies, setting up a system

gories listed above, in addition to risks associated with settlement.

interest rate risk in the banking book which are taken into account

which these policies apply; 2) Provide all necessary guidance to

of checks and balances, contingency planning for emergencies

Each risk category is managed taking into account the particular

under the Second Pillar of Basel II. In addition, we conduct capital

Group companies to enable them to follow the basic risk manage-

and serious situations, and verifying preparedness to handle all

characteristics of that category. In addition, the Corporate Risk

risk-based management activities on a consolidated basis, includ-

ment policies set forth by SMFG and set up their own appropriate

conceivable risk situations. In addition, there are specific opera-

Management Department—independent of the operating units—

ing each Group company.

risk management systems; and 3) Monitor the implementation of

tional policies for implementing appropriate management of risk by

comprehensively and systematically manages all categories of risk

Liquidity risk is managed within the context of cash-flow plans

risk management by all Group companies to ensure that their

all Group companies.

practices meet the relevant standards.

(1) Types of Risk to Be Managed

Under SMFG’s Groupwide basic policies for risk management,

all Group companies periodically carry out reviews of the basic

management policies for each risk category, or whenever deemed

in cooperation with the Corporate Planning Department.

and funding gap. Other risk categories are managed with proce-

Furthermore, under our system top management plays an

dures closely attuned to the nature of the risk, as described in the

active role in the drafting of basic policies for risk management.

following paragraphs.

The decision-making process for addressing credit, market, and

At SMFG, we classify risk into the following categories: (1) credit

necessary, thus ensuring that the policies followed at any time are

liquidity risks at the operating level is strengthened by the Credit

(2) Risk Capital Limit

risk, (2) market risk, (3) liquidity risk, and (4) operational risk

the most appropriate. The management of SMFG constantly moni-

Risk Management Committee and the Market Risk Management

In the case of credit and market risks, we set maximum risk capital

(including processing risk and systems risk). In addition, we pro-

tors the conduct of risk management at Group companies,

Committee, which are subcommittees of the Management Commit-

limits, which indicate the maximum risk that may be taken during

vide individually tailored guidance to help Group companies

providing guidance when necessary.

tee. The Management Committee is also attended by the relevant

the period, taking account the level of stress stipulated in business

identify categories of risk that need to be addressed. Risk

department heads.

■ SMFG’s Risk Management System

plans. In addition, for operational risk, we also allocate risk capital,

and, for the Group as a whole, we set total risk capital allocations

within SMFG’s capital. In the case of credit and market risks, risk

■ Risk Management Framework

SMFG 2008

SMFG 2008 37

Risk Management

Basic Approach
Financial and economic deregulation, globalization, and advances

categories are constantly reviewed, and new categories may be

added in response to changes in the operating environment. The

Risk Management System
Top management plays an active role in determining SMFG’s

Risk Capital-Based Management
(1) Framework

in IT are generating new business opportunities for financial institu-

Corporate Risk Management Department works with the Corporate

Groupwide basic policies for risk management. The system works

In order to maintain a balance between risk and return as well as

tions. The risks accompanying these new business opportunities

Planning Department to comprehensively and systematically man-

as follows: The basic policies for risk management are determined

ensure the soundness of the Group from an overall perspective,

are not only increasing in number but also growing in diversity and

age all these categories of risk across the entire Group.

by the Management Committee before being authorized by the

we employ the risk capital-based management method. We mea-

complexity. Accordingly, identifying, measuring, and controlling

Board. The Management Committee, the designated Board mem-

sure “risk capital” based on value at risk (VaR), etc. as a uniform

risks have never been more important in the management of a

(2) Fundamental Principles and Basic Policies for Risk Management

bers, and the relevant risk management departments perform risk

basic measure of credit, market, and operational risks, taking

financial holding company.

SMFG’s Groupwide basic policies for risk management stipulate

management according to the basic policies.

account of the special characteristics of each type of risk and the

SMFG has encapsulated the basic principles to be employed

the fundamental principles for risk management that must be fol-

Risk management systems are in place at the individual Group

business activities of each Group company. We then allocate capi-

in risk management in the manual entitled Regulations on Risk

lowed, and spell out risk management procedures from various

companies in accordance with SMFG’s Groupwide basic policies

tal appropriately and effectively to each unit to keep total exposure

Management. In the manual, we have specified the basic policies

perspectives. These include managing risk on a consolidated

for risk management. For example, at SMBC, specific departments

to various risks within the scope of our resources, i.e., capital. In

for risk management: 1) Set forth SMFG’s Groupwide basic poli-

accounting basis, managing risk using quantification methods,

have been appointed to oversee the handling of the four risk cate-

this framework, risk capital includes credit concentration risk and

cies for risk management after specifying the categories of risk to

ensuring consistency with business strategies, setting up a system

gories listed above, in addition to risks associated with settlement.

interest rate risk in the banking book which are taken into account

which these policies apply; 2) Provide all necessary guidance to

of checks and balances, contingency planning for emergencies

Each risk category is managed taking into account the particular

under the Second Pillar of Basel II. In addition, we conduct capital

Group companies to enable them to follow the basic risk manage-

and serious situations, and verifying preparedness to handle all

characteristics of that category. In addition, the Corporate Risk

risk-based management activities on a consolidated basis, includ-

ment policies set forth by SMFG and set up their own appropriate

conceivable risk situations. In addition, there are specific opera-

Management Department—independent of the operating units—

ing each Group company.

risk management systems; and 3) Monitor the implementation of

tional policies for implementing appropriate management of risk by

comprehensively and systematically manages all categories of risk

Liquidity risk is managed within the context of cash-flow plans

risk management by all Group companies to ensure that their

all Group companies.

practices meet the relevant standards.

(1) Types of Risk to Be Managed

Under SMFG’s Groupwide basic policies for risk management,

all Group companies periodically carry out reviews of the basic

management policies for each risk category, or whenever deemed

in cooperation with the Corporate Planning Department.

and funding gap. Other risk categories are managed with proce-

Furthermore, under our system top management plays an

dures closely attuned to the nature of the risk, as described in the

active role in the drafting of basic policies for risk management.

following paragraphs.

The decision-making process for addressing credit, market, and

At SMFG, we classify risk into the following categories: (1) credit

necessary, thus ensuring that the policies followed at any time are

liquidity risks at the operating level is strengthened by the Credit

(2) Risk Capital Limit

risk, (2) market risk, (3) liquidity risk, and (4) operational risk

the most appropriate. The management of SMFG constantly moni-

Risk Management Committee and the Market Risk Management

In the case of credit and market risks, we set maximum risk capital

(including processing risk and systems risk). In addition, we pro-

tors the conduct of risk management at Group companies,

Committee, which are subcommittees of the Management Commit-

limits, which indicate the maximum risk that may be taken during

vide individually tailored guidance to help Group companies

providing guidance when necessary.

tee. The Management Committee is also attended by the relevant

the period, taking account the level of stress stipulated in business

identify categories of risk that need to be addressed. Risk

department heads.

■ SMFG’s Risk Management System

plans. In addition, for operational risk, we also allocate risk capital,

and, for the Group as a whole, we set total risk capital allocations

within SMFG’s capital. In the case of credit and market risks, risk

■ Risk Management Framework

SMFG 2008

SMFG 2008 37

capital limits are sub-divided into guidelines or ceilings for each

(3) Credit Policy

business including VaR and loss limits. Therefore, by strictly

SMBC’s credit policy comprises clearly stated universal and basic

observing the VaR and loss limits, and other factors, SMFG main-

operating concepts, policies, and standards for credit operations,

tains the soundness of the Group as a whole.

in accordance with the business mission and rules of conduct.

Implementation of Basel II
The Basel Capital Accord, an international agreement for ensuring

SMBC is promoting the understanding of and strict adherence

to its credit policy among all its managers and employees. By con-

ducting risk-sensitive credit management in accordance with

the soundness of banks through adherence to BIS capital ade-

Basel II and other capital adequacy regulations, SMBC aims to

quacy regulations, was revised in response to the diversification

enhance shareholder value and play a key part in society by

of the banking business and the increasing sophistication of risk

providing high-value-added financial services.

management technology. The revised BIS regulations, known

as Basel II, became effective from March 31, 2007 in Japan.

Basel II requires banks to implement internal controls to serve

2. Credit Risk Management System
At SMBC, the Credit & Investment Planning Department within the

as the basis for capital calculation, and to strengthen their risk

Corporate Staff Unit is responsible for the comprehensive manage-

management framework. It also requires disclosure of information

ment of credit risk. This department drafts and administers credit

to encourage market discipline in risk management.

policies, the internal rating system, credit authority guidelines, and

We have been implementing initiatives to strengthen our risk

credit application guidelines, and manages NPLs (non-performing

management framework, taking into account Basel II and other

loans) and other aspects of credit portfolio management. The

considerations.

department also cooperates with the Corporate Risk Management

Details of the initiatives are provided below, and detailed infor-

Department in quantifying credit risk (risk capital and risk-

mation on the capital ratio is provided in the discussion on Capital

weighted assets) and controls the bank’s entire credit risk. Further,

Ratio Information appearing in the Financial Section.

the Credit Portfolio Management Department within the Credit &

Credit Risk
1. Basic Approach to Credit Risk Management
(1) Definition of Credit Risk

Investment Planning Department has been strengthening its active

portfolio management function whereby loan securitization and

other market transactions are used to stabilize the portfolio’s credit

risk for a more sophisticated portfolio.

Credit risk is the possibility of a loss arising from a credit event,

The Corporate Research Department within the Corporate Ser-

such as deterioration in the financial condition of a borrower, that

vices Unit performs research on industries as well as investigates

causes an asset (including off-balance sheet transactions) to lose

the business situations of borrower enterprises to detect early

■ SMBC’s Credit Risk Management System

3.Credit Risk Management Methods
(1) Credit Risk Assessment and Quantification

balance sheet and qualitative factors to derive the obligor grade.

In the event that the borrower is domiciled overseas, internal rat-

value or become worthless.

signs of problems or growth potential. The Credit Administration

At SMBC, to effectively manage the risk involved in individual

ings for credit are made after taking into consideration country risk,

Overseas credits also include an element of country risk,

Department is responsible for handling NPLs of borrowers classi-

loans as well as the credit portfolio as a whole, we first acknowl-

which represents an assessment of the credit quality of each coun-

which is closely related to credit risk. This is the risk of loss caused

fied as potentially bankrupt or lower, and draws up plans for their

edge that every loan entails credit risks, assesses the credit risk

try, based on its political and economic situation, as well as its

by changes in foreign exchange, or political or economic situa-

workouts, including write-offs, and corporate rehabilitation. The

posed by each borrower and loan using an internal rating system,

current account balance and external debt. Self-assessment is the

tions.

department closely liaises with the Group company SMBC Busi-

ness Servicing Co., Ltd., which engages in related services, and

and quantifies that risk for control purposes.

obligor grading process for assigning lower grades, and the bor-

rower categories used in self-assessment are consistent with the

(2) Fundamental Principles for Credit Risk Management

works to efficiently reduce the amount of NPLs by such means as

(a) Internal Rating System

obligor grade categories.

All Group companies follow the fundamental principles established

the sell-off of claims.

There is an internal rating system for each asset control category

Obligor grades and facility grades are reviewed once a year

by SMFG to assess and manage credit risk on a Groupwide basis

The credit departments within each business unit conduct

set according to portfolio characteristics. For example, credits to

and, whenever necessary, such as when there are changes in the

and further raise the level of accuracy and comprehensiveness of

credit risk management for loans handled by their units and man-

commercial and industrial (C&I) companies, individuals for busi-

credit situation.

Groupwide credit risk management. Each Group company must

age their units’ portfolios. The credit limits they use are based on

ness purposes (domestic only), sovereigns, public-sector entities,

There are also grading systems for SME loans, loans to indi-

comprehensively manage credit risk according to the nature of its

the baseline amounts established for each grading category, with

and financial institutions are assigned an “obligor grade,” which

viduals, and project finance and other structured finance tailored

business, and assess and manage credit risk of individual loans

particular attention paid to evaluating and managing customers or

indicates the borrower’s creditworthiness, and/or “facility grade,”

according to the risk characteristics of these types of assets.

and credit portfolios quantitatively and using consistent standards.

loans perceived to have particularly high credit risk.

which indicates the collectibility of assets taking into account

The Credit & Investment Planning Department centrally man-

Credit risk is the most significant risk to which SMFG is

The Credit Review Department, operating independently of the

transaction conditions such as guarantee/collateral, and tenor. An

ages the internal rating systems, and properly designs, operates,

exposed. Without effective credit risk management, the impact of

business units, audits asset quality, accuracy of gradings, self-

obligor grade is determined by first assigning a financial grade

supervises, and validates the grading models. It validates the

the corresponding losses on operations can be overwhelming.

assessment, and state of credit risk management, and reports the

using a financial strength grading model and data obtained from

grading models (including statistical validation) of main assets

The purpose of credit risk management is to keep credit risk

results directly to the Board of Directors and the Management

the obligor’s financial statements. The financial grade is then

following the procedures manual once a year, to ensure their effec-

exposure to a permissible level relative to capital, to maintain the

Committee.

adjusted taking into account the actual state of the obligor’s

tiveness and suitability.

soundness of assets, and to ensure returns commensurate with

SMBC has established the Credit Risk Committee, as a con-

risk. This leads to a loan portfolio that achieves high returns on

sultative body, to round out its oversight system for undertaking

capital and assets.

flexible and efficient control of credit risk, and ensuring the overall

soundness of the bank’s loan operations.

SMFG 2008

SMFG 2008 39

capital limits are sub-divided into guidelines or ceilings for each

(3) Credit Policy

business including VaR and loss limits. Therefore, by strictly

SMBC’s credit policy comprises clearly stated universal and basic

observing the VaR and loss limits, and other factors, SMFG main-

operating concepts, policies, and standards for credit operations,

tains the soundness of the Group as a whole.

in accordance with the business mission and rules of conduct.

Implementation of Basel II
The Basel Capital Accord, an international agreement for ensuring

SMBC is promoting the understanding of and strict adherence

to its credit policy among all its managers and employees. By con-

ducting risk-sensitive credit management in accordance with

the soundness of banks through adherence to BIS capital ade-

Basel II and other capital adequacy regulations, SMBC aims to

quacy regulations, was revised in response to the diversification

enhance shareholder value and play a key part in society by

of the banking business and the increasing sophistication of risk

providing high-value-added financial services.

management technology. The revised BIS regulations, known

as Basel II, became effective from March 31, 2007 in Japan.

Basel II requires banks to implement internal controls to serve

2. Credit Risk Management System
At SMBC, the Credit & Investment Planning Department within the

as the basis for capital calculation, and to strengthen their risk

Corporate Staff Unit is responsible for the comprehensive manage-

management framework. It also requires disclosure of information

ment of credit risk. This department drafts and administers credit

to encourage market discipline in risk management.

policies, the internal rating system, credit authority guidelines, and

We have been implementing initiatives to strengthen our risk

credit application guidelines, and manages NPLs (non-performing

management framework, taking into account Basel II and other

loans) and other aspects of credit portfolio management. The

considerations.

department also cooperates with the Corporate Risk Management

Details of the initiatives are provided below, and detailed infor-

Department in quantifying credit risk (risk capital and risk-

mation on the capital ratio is provided in the discussion on Capital

weighted assets) and controls the bank’s entire credit risk. Further,

Ratio Information appearing in the Financial Section.

the Credit Portfolio Management Department within the Credit &

Credit Risk
1. Basic Approach to Credit Risk Management
(1) Definition of Credit Risk

Investment Planning Department has been strengthening its active

portfolio management function whereby loan securitization and

other market transactions are used to stabilize the portfolio’s credit

risk for a more sophisticated portfolio.

Credit risk is the possibility of a loss arising from a credit event,

The Corporate Research Department within the Corporate Ser-

such as deterioration in the financial condition of a borrower, that

vices Unit performs research on industries as well as investigates

causes an asset (including off-balance sheet transactions) to lose

the business situations of borrower enterprises to detect early

■ SMBC’s Credit Risk Management System

3.Credit Risk Management Methods
(1) Credit Risk Assessment and Quantification

balance sheet and qualitative factors to derive the obligor grade.

In the event that the borrower is domiciled overseas, internal rat-

value or become worthless.

signs of problems or growth potential. The Credit Administration

At SMBC, to effectively manage the risk involved in individual

ings for credit are made after taking into consideration country risk,

Overseas credits also include an element of country risk,

Department is responsible for handling NPLs of borrowers classi-

loans as well as the credit portfolio as a whole, we first acknowl-

which represents an assessment of the credit quality of each coun-

which is closely related to credit risk. This is the risk of loss caused

fied as potentially bankrupt or lower, and draws up plans for their

edge that every loan entails credit risks, assesses the credit risk

try, based on its political and economic situation, as well as its

by changes in foreign exchange, or political or economic situa-

workouts, including write-offs, and corporate rehabilitation. The

posed by each borrower and loan using an internal rating system,

current account balance and external debt. Self-assessment is the

tions.

department closely liaises with the Group company SMBC Busi-

ness Servicing Co., Ltd., which engages in related services, and

and quantifies that risk for control purposes.

obligor grading process for assigning lower grades, and the bor-

rower categories used in self-assessment are consistent with the

(2) Fundamental Principles for Credit Risk Management

works to efficiently reduce the amount of NPLs by such means as

(a) Internal Rating System

obligor grade categories.

All Group companies follow the fundamental principles established

the sell-off of claims.

There is an internal rating system for each asset control category

Obligor grades and facility grades are reviewed once a year

by SMFG to assess and manage credit risk on a Groupwide basis

The credit departments within each business unit conduct

set according to portfolio characteristics. For example, credits to

and, whenever necessary, such as when there are changes in the

and further raise the level of accuracy and comprehensiveness of

credit risk management for loans handled by their units and man-

commercial and industrial (C&I) companies, individuals for busi-

credit situation.

Groupwide credit risk management. Each Group company must

age their units’ portfolios. The credit limits they use are based on

ness purposes (domestic only), sovereigns, public-sector entities,

There are also grading systems for SME loans, loans to indi-

comprehensively manage credit risk according to the nature of its

the baseline amounts established for each grading category, with

and financial institutions are assigned an “obligor grade,” which

viduals, and project finance and other structured finance tailored

business, and assess and manage credit risk of individual loans

particular attention paid to evaluating and managing customers or

indicates the borrower’s creditworthiness, and/or “facility grade,”

according to the risk characteristics of these types of assets.

and credit portfolios quantitatively and using consistent standards.

loans perceived to have particularly high credit risk.

which indicates the collectibility of assets taking into account

The Credit & Investment Planning Department centrally man-

Credit risk is the most significant risk to which SMFG is

The Credit Review Department, operating independently of the

transaction conditions such as guarantee/collateral, and tenor. An

ages the internal rating systems, and properly designs, operates,

exposed. Without effective credit risk management, the impact of

business units, audits asset quality, accuracy of gradings, self-

obligor grade is determined by first assigning a financial grade

supervises, and validates the grading models. It validates the

the corresponding losses on operations can be overwhelming.

assessment, and state of credit risk management, and reports the

using a financial strength grading model and data obtained from

grading models (including statistical validation) of main assets

The purpose of credit risk management is to keep credit risk

results directly to the Board of Directors and the Management

the obligor’s financial statements. The financial grade is then

following the procedures manual once a year, to ensure their effec-

exposure to a permissible level relative to capital, to maintain the

Committee.

adjusted taking into account the actual state of the obligor’s

tiveness and suitability.

soundness of assets, and to ensure returns commensurate with

SMBC has established the Credit Risk Committee, as a con-

risk. This leads to a loan portfolio that achieves high returns on

sultative body, to round out its oversight system for undertaking

capital and assets.

flexible and efficient control of credit risk, and ensuring the overall

soundness of the bank’s loan operations.

SMFG 2008

SMFG 2008 39

(b) Quantification of Credit Risk

(2) Framework for Managing Individual Loans

(b) Credit Monitoring System

To manage country risk, SMBC also has credit limit guidelines

Credit risk quantification refers to the process of estimating the

(a) Credit Assessment

At SMBC, in addition to analyzing loans at the application stage,

based on each country’s creditworthiness.

degree of credit risk of a portfolio or individual loan taking into

At SMBC, credit assessment of corporate loans involves a variety

the Credit Monitoring System is utilized to reassess obligor grades,

account not just the obligor’s probability of default (PD), but also

of financial analyses, including cash flow, to predict an enterprise’s

and review self-assessment and credit policies so that problems

the concentration of risk in a specific customer or industry and the

capability of loan repayment and its growth prospects. These

can be detected at an early stage and quick and effective action

Against the background of increasing sophistication in methods

loss impact of fluctuations in the value of collateral, such as real

quantitative measures, when combined with qualitative analyses of

can be taken. The system includes periodic monitoring carried out

of managing credit risk, SMBC is engaged in a new type of un-

estate and securities.

industrial trends, the enterprise’s R&D capabilities, the competi-

each time an obligor enterprise discloses financial results, as well

secured loans. Meanwhile, the bank runs credit operations on the

Specifically, first, the PD by grade, LGD (loss given default),

tiveness of its products or services, and its management caliber,

as continuous monitoring performed each time credit conditions

basic principle of earning returns that are commensurate with the

credit quality correlation among obligors, and other parameter val-

result in a comprehensive credit assessment. The loan application

change, as indicated in the diagram below.

credit risk involved, and makes every effort to reduce capital and

ues are estimated using historical data of obligors and facilities

is analyzed in terms of the intended utilization of the funds and the

credit costs as well as general and administrative expenses.

stored in a database to calculate the credit risk. Then, based on

repayment schedule. Thus, SMBC is able to arrive at an accurate

(3) Framework for Credit Portfolio Management

these parameters, we run a simulation of 10,000 iterations of simul-

and fair credit decision based on an objective examination of all

At SMBC, in addition to managing individual loans, SMBC applies

(d) Reduction and Prevention of Non-Performing Loans

taneous default using the Monte Carlo method to calculate our

relevant factors.

the following basic policies to the management of the entire credit

On NPLs and potential NPLs, SMBC carries out regular loan

maximum loss exposure to the estimate amount of the maximum

Increasing the understandability to customers of loan condi-

portfolio to maintain and improve its soundness and profitability

reviews to clarify handling policies and action plans, enabling it to

losses that may be incurred. Based on these quantitative results,

tions and approval standards for specific borrowing purposes and

over the medium-to-long term.

we allocate risk capital. Please note that the PD and LGD values

loan categories is a part of SMBC’s ongoing review of lending

swiftly implement measures to prevent deterioration of borrowers’

business situations, support business recoveries, collect on loans,

are, in principle, the same values as those used for calculating the

practices, which includes the revision of loan contract forms with

(a) Risk-Taking within the Scope of Capital

and enhance loan security.

capital ratio.

the chief aim of clarifying lending conditions utilizing financial

To keep credit risk exposure to a permissible level relative to

Risk quantification is also executed for purposes such as to

covenants. SMBC is also making steady progress in rationalizing

capital, SMBC sets credit risk capital limits for internal control

(e) Toward Active Portfolio Management

determine the portfolio’s risk concentration, or to simulate eco-

its credit assessment process.

purposes. Under these limits, separate guidelines are issued for

SMBC makes active use of credit derivatives, loan securitization,

nomic movements (stress tests), and the results are used for

To respond proactively and promptly to customers’ funding

each business unit and marketing unit. Also issued are specialized

and other instruments to proactively and flexibly manage its port-

making optimal decisions across the whole range of business

needs—particularly those of SMEs—we employ a standardized

guidelines for each business unit and business type, such as real

folio to stabilize credit risk.

operations, including formulating business plans and providing a

credit risk assessment process for SMEs that uses a credit-scoring

estate finance, fund investment, and investment in securitization

standard against which individual credit applications are

model. With this process, we are building a regime for efficiently

products. Regular monitoring is conducted to make sure that these

(4) Self-Assessment, Write-Offs, and Provisions

assessed.

marketing our Business Select Loan and other SME loans.

guidelines are being followed, thus ensuring appropriate overall

(a) Self-Assessment

■ SMBC’s Obligor Grading System

In the field of housing loans for indi-

viduals, we employ a credit assessment

model based on credit data amassed

and analyzed by SMBC over many

years. This model enables our loan

officers to efficiently make rational

decisions on housing loan applications,

and to reply to the customers without

delay. It also facilitates the effective

management of credit risk, as well as the

flexible setting of interest rates.

We also provide loans to individuals

who rent out properties such as apart-

ments. The loan applications are

subjected to a precise credit risk

assessment process utilizing a risk-

assessment model that factors in the

projected revenue from the rental busi-

ness. The process is also used to

provide advice to such customers on

how to revise their business plans.

management of credit risk.

(b) Controlling Concentration Risk

SMBC conducts rigorous self-assessment of asset quality using

criteria based on the Financial Inspection Manual of the Financial

Services Agency and the Practical Guideline published by the

Because the concentration of credit risk in an industry or corporate

Japanese Institute of Certified Public Accountants. Self-assess-

group has the potential to substantially impair capital, SMBC

ment is the latter stage of the obligor grading process for

implements measures to prevent the excessive concentration

determining the borrower’s ability to fulfill debt obligations, and the

of loans in an industry and to control large exposure to individual

obligor grade criteria are consistent with the categories used in

companies or corporate groups by setting guidelines for maximum

self-assessment.

loan amounts.

■ SMBC’s Credit Monitoring System

SMFG 2008

SMFG 2008 41

(b) Quantification of Credit Risk

(2) Framework for Managing Individual Loans

(b) Credit Monitoring System

To manage country risk, SMBC also has credit limit guidelines

Credit risk quantification refers to the process of estimating the

(a) Credit Assessment

At SMBC, in addition to analyzing loans at the application stage,

based on each country’s creditworthiness.

degree of credit risk of a portfolio or individual loan taking into

At SMBC, credit assessment of corporate loans involves a variety

the Credit Monitoring System is utilized to reassess obligor grades,

account not just the obligor’s probability of default (PD), but also

of financial analyses, including cash flow, to predict an enterprise’s

and review self-assessment and credit policies so that problems

the concentration of risk in a specific customer or industry and the

capability of loan repayment and its growth prospects. These

can be detected at an early stage and quick and effective action

Against the background of increasing sophistication in methods

loss impact of fluctuations in the value of collateral, such as real

quantitative measures, when combined with qualitative analyses of

can be taken. The system includes periodic monitoring carried out

of managing credit risk, SMBC is engaged in a new type of un-

estate and securities.

industrial trends, the enterprise’s R&D capabilities, the competi-

each time an obligor enterprise discloses financial results, as well

secured loans. Meanwhile, the bank runs credit operations on the

Specifically, first, the PD by grade, LGD (loss given default),

tiveness of its products or services, and its management caliber,

as continuous monitoring performed each time credit conditions

basic principle of earning returns that are commensurate with the

credit quality correlation among obligors, and other parameter val-

result in a comprehensive credit assessment. The loan application

change, as indicated in the diagram below.

credit risk involved, and makes every effort to reduce capital and

ues are estimated using historical data of obligors and facilities

is analyzed in terms of the intended utilization of the funds and the

credit costs as well as general and administrative expenses.

stored in a database to calculate the credit risk. Then, based on

repayment schedule. Thus, SMBC is able to arrive at an accurate

(3) Framework for Credit Portfolio Management

these parameters, we run a simulation of 10,000 iterations of simul-

and fair credit decision based on an objective examination of all

At SMBC, in addition to managing individual loans, SMBC applies

(d) Reduction and Prevention of Non-Performing Loans

taneous default using the Monte Carlo method to calculate our

relevant factors.

the following basic policies to the management of the entire credit

On NPLs and potential NPLs, SMBC carries out regular loan

maximum loss exposure to the estimate amount of the maximum

Increasing the understandability to customers of loan condi-

portfolio to maintain and improve its soundness and profitability

reviews to clarify handling policies and action plans, enabling it to

losses that may be incurred. Based on these quantitative results,

tions and approval standards for specific borrowing purposes and

over the medium-to-long term.

we allocate risk capital. Please note that the PD and LGD values

loan categories is a part of SMBC’s ongoing review of lending

swiftly implement measures to prevent deterioration of borrowers’

business situations, support business recoveries, collect on loans,

are, in principle, the same values as those used for calculating the

practices, which includes the revision of loan contract forms with

(a) Risk-Taking within the Scope of Capital

and enhance loan security.

capital ratio.

the chief aim of clarifying lending conditions utilizing financial

To keep credit risk exposure to a permissible level relative to

Risk quantification is also executed for purposes such as to

covenants. SMBC is also making steady progress in rationalizing

capital, SMBC sets credit risk capital limits for internal control

(e) Toward Active Portfolio Management

determine the portfolio’s risk concentration, or to simulate eco-

its credit assessment process.

purposes. Under these limits, separate guidelines are issued for

SMBC makes active use of credit derivatives, loan securitization,

nomic movements (stress tests), and the results are used for

To respond proactively and promptly to customers’ funding

each business unit and marketing unit. Also issued are specialized

and other instruments to proactively and flexibly manage its port-

making optimal decisions across the whole range of business

needs—particularly those of SMEs—we employ a standardized

guidelines for each business unit and business type, such as real

folio to stabilize credit risk.

operations, including formulating business plans and providing a

credit risk assessment process for SMEs that uses a credit-scoring

estate finance, fund investment, and investment in securitization

standard against which individual credit applications are

model. With this process, we are building a regime for efficiently

products. Regular monitoring is conducted to make sure that these

(4) Self-Assessment, Write-Offs, and Provisions

assessed.

marketing our Business Select Loan and other SME loans.

guidelines are being followed, thus ensuring appropriate overall

(a) Self-Assessment

■ SMBC’s Obligor Grading System

In the field of housing loans for indi-

viduals, we employ a credit assessment

model based on credit data amassed

and analyzed by SMBC over many

years. This model enables our loan

officers to efficiently make rational

decisions on housing loan applications,

and to reply to the customers without

delay. It also facilitates the effective

management of credit risk, as well as the

flexible setting of interest rates.

We also provide loans to individuals

who rent out properties such as apart-

ments. The loan applications are

subjected to a precise credit risk

assessment process utilizing a risk-

assessment model that factors in the

projected revenue from the rental busi-

ness. The process is also used to

provide advice to such customers on

how to revise their business plans.

management of credit risk.

(b) Controlling Concentration Risk

SMBC conducts rigorous self-assessment of asset quality using

criteria based on the Financial Inspection Manual of the Financial

Services Agency and the Practical Guideline published by the

Because the concentration of credit risk in an industry or corporate

Japanese Institute of Certified Public Accountants. Self-assess-

group has the potential to substantially impair capital, SMBC

ment is the latter stage of the obligor grading process for

implements measures to prevent the excessive concentration

determining the borrower’s ability to fulfill debt obligations, and the

of loans in an industry and to control large exposure to individual

obligor grade criteria are consistent with the categories used in

companies or corporate groups by setting guidelines for maximum

self-assessment.

loan amounts.

■ SMBC’s Credit Monitoring System

SMFG 2008

SMFG 2008 41

gories: Normal Borrowers, Borrowers Requiring Caution,

Borrowers Requiring Caution

At the same time, self-assessment is a preparatory task for

ensuring SMBC’s asset quality and calculating the appropriate

level of write-offs and provisions. Each asset is assessed individu-

ally for its security and collectibility. Depending on the borrower’s

current situation, the borrower is assigned to one of five cate-

Potentially Bankrupt Borrowers, Effectively Bankrupt Borrowers,

and Bankrupt Borrowers. Based on the borrower’s category, claims

on the borrower are classified into Classification I, II, III, and IV

assets according to their default and impairment risk levels, taking

into account such factors as collateral and guarantees. As part of

our efforts to bolster risk management throughout the Group, our

consolidated subsidiaries carry out self-assessment in substan-

tially the same manner.

Borrower Categories, Defined

Normal
Borrowers

Borrowers
Requiring Caution

Potentially Bankrupt
Borrowers

Effectively Bankrupt
Borrowers

Bankrupt
Borrowers

Borrowers with good earnings performances and no significant
financial problems

Borrowers identified for close monitoring

Borrowers perceived to have a high risk of falling into bank-
ruptcy

Borrowers that may not have legally or formally declared bank-
ruptcy but are essentially bankrupt

Borrowers that have been legally or formally declared bankrupt

Asset Classifications, Defined

Self-Assessment Borrower Categories

Standards for Write-Offs and Provisions

Normal Borrowers

The expected loss amount for the next 12 months is
calculated for each grade based on the grade’s histori-
cal bankruptcy rate, and the total amount is recorded
as “provision for the general reserve for possible loan
losses.”

These assets are divided into groups according to the
level of default risk. Amounts are recorded as provi-
sions for the general reserve in proportion to the
expected losses based on the historical bankruptcy
rate of each group. The groups are “claims on
Substandard Borrowers” and “claims on other
Borrowers Requiring Caution.” The latter group is fur-
ther subdivided according to the borrower’s financial
position, credit situation, and other factors. Further,
when cash flows can be estimated reasonably accu-
rately, the discount cash flow (DCF) method is applied
mainly to large claims for calculating the provision
amount.

A provision for the specific reserve for possible loan
losses is made for the portion of Classification III
assets (calculated for each borrower) not secured by
collateral, guarantee, or other means. Further, when
cash flows can be estimated reasonably accurately, the
DCF method is applied mainly to large claims for cal-
culating the provision amount.

Classification III asset and Classification IV asset
amounts for each borrower are calculated, and the full
amount of Classification IV assets (deemed to be
uncollectible or of no value) is written off in principle
and provision for the specific reserve is made for the
full amount of Classification III assets.

Potentially Bankrupt Borrowers

Effectively Bankrupt/
Bankrupt Borrowers

Notes

General reserve

Provisions made in accordance with general inherent default risk of
loans, unrelated to specific individual loans or other claims

Specific reserve

Provisions made for claims that have been found uncollectible in part
or in total (individually evaluated claims)

Classification I

Assets not classified under Classifications II, III, or IV

Discounted Cash Flow Method

Classification II

Assets perceived to have an above-average risk of uncollectibility

Classification III

Assets for which final collection or asset value is very doubtful
and which pose a high risk of incurring a loss

Classification IV

Assets assessed as uncollectible or worthless

(b) Asset Write-Offs and Provisions

In cases where claims have been determined to be uncollectible,

or deemed to be uncollectible, write-offs signify the recognition of

losses on the account books with respect to such claims. Write-

offs can be made either in the form of loss recognition by offsetting

uncollectible amounts against corresponding balance sheet items,

referred to as a direct write-off, or else by recognition of a loan loss

provision on a contra-asset account in the amount deemed uncol-

lectible, referred to as an indirect write-off. Recognition of indirect

write-offs is generally known as provision for the reserve for possi-

ble loan losses.

SMBC’s write-off and provision criteria for each self-assess-

ment borrower category are shown in the table below. As part of

our overall measures to strengthen risk management throughout

the Group, all consolidated subsidiaries use substantially the same

standards as SMBC for write-offs and provisions.

SMBC uses the discounted cash flow (DFC) method to calcu-
late the provision amounts for large claims on Substandard
Borrowers and Potentially Bankrupt Borrowers when the cash
flow from repayment of principal and interest received can be
estimated reasonably accurately. SMBC then makes provisions
equivalent to the excess of the book value of the claims over
the said cash inflow discounted by the initial contractual inter-
est rate or the effective interest rate at the time of origination.
One of the major advantages of the DCF method over conven-
tional methods of calculating the provision amount is that it
enables effective evaluation of each individual borrower.
However, as the provision amount depends on the future cash
flow estimated on the basis of the borrower’s business recon-
struction plan and DCF formula input values, such as the
discount rate and the probability of the borrower going into
bankruptcy, SMBC makes every effort to utilize up-to-date and
correct data to realize the most accurate estimates possible.

Problem assets are loans and other claims of which recovery of

either principal or interest appears doubtful, and are disclosed in

accordance with the Banking Law (in which they are referred to as

“risk-monitored loans”) and the Financial Reconstruction Law

(where they are referred to as “problem assets”). Problem assets

SMFG 2008

are classified based on the borrower categories assigned during

liquidity risks in an integrated manner. The department not only

self-assessment. For detailed information on results of self-assess-

monitors the current risk situations, but also reports regularly to the

ments, write-offs, provisions, and disclosure of problem assets,

Management Committee and the Board of Directors. Furthermore,

please refer to page 186.

4. Market Credit Risk Management
Financial products, such as funds, securitized products, and credit

SMBC’s ALM Committee meets on a monthly basis to examine

reports on the state of observance of the bank’s limits on market

and liquidity risks, and to review and discuss the bank’s ALM poli-

cies.

derivatives, that have indirect risk arising from the assets under-

To prevent unforeseen processing errors as well as fraudulent

lying these products, such as bonds, loan obligations, and other

transactions, it is important to establish a system of checks on the

assets (the underlying assets), are recognized as transactions that

business units (front office). At SMBC, both the processing depart-

combine the characteristics of the credit risk of the underlying

ments (back office) and the administrative departments (middle

assets and “market risk” that arises from the buying and selling of

office) conduct the checks. In addition, SMBC’s independent Inter-

these products. This is referred to as market credit risk.

nal Audit Unit periodically performs comprehensive internal audits

For these types of products, we manage credit risk using the

to verify that the risk management system is functioning properly.

methods of analysis and assessment already described for credit

risk, but, for the sake of complete risk management, we also apply

the methods for management of market risk described in the

following section on management of market and liquidity risk.

In addition, we have established guidelines based on the

characteristics of these types of risk and appropriately manage the

risk of losses.

Market and Liquidity Risks
1. Basic Approach to Market and Liquidity Risk Manage-
ment
(1) Definitions of Market and Liquidity Risk

Market risk is the possibility that fluctuations in interest rates, for-

eign exchange rates, or stock prices will change the market value

of financial products, leading to a loss.

Liquidity risk is the possibility of encountering an obstacle to

raising the funds required for settlement due either to a mismatch

between the use and procurement of funds or to an unexpected

outflow of funds, or being forced to borrow at higher interest rates

than usual.

(2) Fundamental Principles for Market and Liquidity Risk Management

SMFG is working to further enhance the effectiveness of its quanti-

tative management of market and liquidity risks across the entire

Group by setting allowable risk limits; ensuring the transparency

of the risk management process; clearly separating front-office,

middle-office, and back-office operations; and establishing

a highly efficient system of mutual checks and balances.

2. Market and Liquidity Risk Management System
On the basis of SMFG’s Groupwide basic policies for risk manage-

ment, SMBC’s Board of Directors authorizes important matters

relating to the management of market and liquidity risks, such as

basic policies and risk limits, which are decided by the Manage-

ment Committee. Additionally, the bank’s Corporate Risk

Management Department, which is independent of business units

that directly handle market transactions, manages market and

■ SMBC’s Market Risk and Liquidity Risk Management System

SMFG 2008 43

gories: Normal Borrowers, Borrowers Requiring Caution,

Borrowers Requiring Caution

At the same time, self-assessment is a preparatory task for

ensuring SMBC’s asset quality and calculating the appropriate

level of write-offs and provisions. Each asset is assessed individu-

ally for its security and collectibility. Depending on the borrower’s

current situation, the borrower is assigned to one of five cate-

Potentially Bankrupt Borrowers, Effectively Bankrupt Borrowers,

and Bankrupt Borrowers. Based on the borrower’s category, claims

on the borrower are classified into Classification I, II, III, and IV

assets according to their default and impairment risk levels, taking

into account such factors as collateral and guarantees. As part of

our efforts to bolster risk management throughout the Group, our

consolidated subsidiaries carry out self-assessment in substan-

tially the same manner.

Borrower Categories, Defined

Normal
Borrowers

Borrowers
Requiring Caution

Potentially Bankrupt
Borrowers

Effectively Bankrupt
Borrowers

Bankrupt
Borrowers

Borrowers with good earnings performances and no significant
financial problems

Borrowers identified for close monitoring

Borrowers perceived to have a high risk of falling into bank-
ruptcy

Borrowers that may not have legally or formally declared bank-
ruptcy but are essentially bankrupt

Borrowers that have been legally or formally declared bankrupt

Asset Classifications, Defined

Self-Assessment Borrower Categories

Standards for Write-Offs and Provisions

Normal Borrowers

Potentially Bankrupt Borrowers

Effectively Bankrupt/
Bankrupt Borrowers

Notes

General reserve

Provisions made in accordance with general inherent default risk of
loans, unrelated to specific individual loans or other claims

Specific reserve

Provisions made for claims that have been found uncollectible in part
or in total (individually evaluated claims)

Classification I

Assets not classified under Classifications II, III, or IV

Discounted Cash Flow Method

Classification II

Assets perceived to have an above-average risk of uncollectibility

Classification III

Assets for which final collection or asset value is very doubtful
and which pose a high risk of incurring a loss

Classification IV

Assets assessed as uncollectible or worthless

(b) Asset Write-Offs and Provisions

In cases where claims have been determined to be uncollectible,

or deemed to be uncollectible, write-offs signify the recognition of

losses on the account books with respect to such claims. Write-

offs can be made either in the form of loss recognition by offsetting

uncollectible amounts against corresponding balance sheet items,

referred to as a direct write-off, or else by recognition of a loan loss

provision on a contra-asset account in the amount deemed uncol-

lectible, referred to as an indirect write-off. Recognition of indirect

write-offs is generally known as provision for the reserve for possi-

ble loan losses.

SMBC’s write-off and provision criteria for each self-assess-

ment borrower category are shown in the table below. As part of

our overall measures to strengthen risk management throughout

the Group, all consolidated subsidiaries use substantially the same

standards as SMBC for write-offs and provisions.

Problem assets are loans and other claims of which recovery of

either principal or interest appears doubtful, and are disclosed in

accordance with the Banking Law (in which they are referred to as

“risk-monitored loans”) and the Financial Reconstruction Law

(where they are referred to as “problem assets”). Problem assets

SMFG 2008

are classified based on the borrower categories assigned during

liquidity risks in an integrated manner. The department not only

self-assessment. For detailed information on results of self-assess-

monitors the current risk situations, but also reports regularly to the

ments, write-offs, provisions, and disclosure of problem assets,

Management Committee and the Board of Directors. Furthermore,

please refer to page 186.

4. Market Credit Risk Management
Financial products, such as funds, securitized products, and credit

SMBC’s ALM Committee meets on a monthly basis to examine

reports on the state of observance of the bank’s limits on market

and liquidity risks, and to review and discuss the bank’s ALM poli-

cies.

derivatives, that have indirect risk arising from the assets under-

To prevent unforeseen processing errors as well as fraudulent

lying these products, such as bonds, loan obligations, and other

transactions, it is important to establish a system of checks on the

assets (the underlying assets), are recognized as transactions that

business units (front office). At SMBC, both the processing depart-

combine the characteristics of the credit risk of the underlying

ments (back office) and the administrative departments (middle

assets and “market risk” that arises from the buying and selling of

office) conduct the checks. In addition, SMBC’s independent Inter-

these products. This is referred to as market credit risk.

nal Audit Unit periodically performs comprehensive internal audits

For these types of products, we manage credit risk using the

to verify that the risk management system is functioning properly.

methods of analysis and assessment already described for credit

risk, but, for the sake of complete risk management, we also apply

the methods for management of market risk described in the

following section on management of market and liquidity risk.

In addition, we have established guidelines based on the

characteristics of these types of risk and appropriately manage the

risk of losses.

Market and Liquidity Risks
1. Basic Approach to Market and Liquidity Risk Manage-
ment
(1) Definitions of Market and Liquidity Risk

Market risk is the possibility that fluctuations in interest rates, for-

eign exchange rates, or stock prices will change the market value

of financial products, leading to a loss.

Liquidity risk is the possibility of encountering an obstacle to

raising the funds required for settlement due either to a mismatch

between the use and procurement of funds or to an unexpected

outflow of funds, or being forced to borrow at higher interest rates

than usual.

(2) Fundamental Principles for Market and Liquidity Risk Management

SMFG is working to further enhance the effectiveness of its quanti-

tative management of market and liquidity risks across the entire

Group by setting allowable risk limits; ensuring the transparency

of the risk management process; clearly separating front-office,

middle-office, and back-office operations; and establishing

a highly efficient system of mutual checks and balances.

2. Market and Liquidity Risk Management System
On the basis of SMFG’s Groupwide basic policies for risk manage-

ment, SMBC’s Board of Directors authorizes important matters

relating to the management of market and liquidity risks, such as

basic policies and risk limits, which are decided by the Manage-

ment Committee. Additionally, the bank’s Corporate Risk

Management Department, which is independent of business units

that directly handle market transactions, manages market and

■ SMBC’s Market Risk and Liquidity Risk Management System

SMFG 2008 43

3. Market and Liquidity Risk Management Methods
(1) Market Risk Management

(b) Back-Testing Results

The relationship between the VaR calculated with the model and

The bank manages market risk by setting maximum limits for

the actual profit and loss data is back-tested daily. The back-test-

“VaR” and maximum loss. These limits are set within the “market

ing results for SMBC’s trading accounts for fiscal 2007 are shown

risk capital limit” which is determined taking into account the

below. A data point below the diagonal line indicates a loss in

bank’s shareholders’ equity and other principal indicators of the

excess of the predicted VaR for that day; however, as in fiscal

bank’s financial position and management resources.

2006, there were no such excess losses during fiscal 2007. This

Market risk can be divided into various factors: foreign

demonstrates that the SMBC VaR model, with a one-sided confi-

exchange rate, interest rate, equity price, and option risks. Fine-

dence interval of 99.0%, is sufficiently reliable.

tuned management of each risk category is achieved by

employing the VaR method in conjunction with suitable indicators

for managing the risk of individual financial instruments such as

the BPV indicator.

Please note that, in the case of interest rate fluctuation risk, the

methods for recognizing the dates for maturity of demand deposits

(current accounts and ordinary deposit accounts that can be with-

drawn at any time) and the method for estimating the time of

cancellation prior to maturity of time deposits and consumer hous-

ing loans differ substantially. At SMBC, the maturity of demand

deposits that are expected to be left with the bank for a prolonged

period is regarded to be five years (2.5 years on average). The

cancellation prior to maturity of time deposits and consumer hous-

ing loans is estimated based on historical data.

(a) VaR Results

The results of VaR calculations for fiscal 2007 are shown in the

table below. SMBC’s internal VaR model makes use of historical

data to prepare scenarios for market fluctuations, and, by con-

ducting simulations of gains and losses, the model estimates the

maximum losses that may occur. (This is known as the historical

simulation method.) This internal SMBC model is evaluated period-

ically by an independent auditing firm to assess its

appropriateness and accuracy.

■ VaR Results

Glossary of Terms
1. VaR (Value at risk)
The largest predicted loss that is possible given a fixed confi-
dence interval. For example, VaR indicates, for a holding period
of one day and a confidence interval of 99.0%, the maximum
loss that may occur as a result of market fluctuations in one day
with a probability of 1%.

2. BPV (Basis point value)
The amount of change in assessed value as a result of a one
basis point (0.01%) movement in interest rates.

3. Trading
A market operation for generating profit by taking advantage of
short-term fluctuations in market values and differences in value
among markets.

4. Banking
A market operation for generating profit through management of
interest rates, terms, and other aspects of assets (loans, bonds,
etc.) and liabilities (deposits, etc.).

■ Back-Testing Results (Trading Book)

SMFG (consolidated) SMBC (consolidated) SMBC (non-consolidated)

■ Decline in Economic Value Based on Outlier Framework

(Billions of yen)

SMBC (consolidated)

SMBC (non-consolidated)

March 31, 2007 March 31, 2008 March 31, 2007 March 31, 2008

165.8

119.7

33.6

3.4

407.4

154.2

196.1

36.7

151.3

112.5

28.1

2.9

398.5

149.7

193.9

36.6

Total
Impact of yen
interest rates
Impact of U.S. dollar
interest rates
Impact of Euro
interest rates

Percentage of Tier I + Tier II

2.1%

5.4%

2.1%

5.8%

Note: “Decline in economic value” is the decline of present value after interest rate shocks

(1st and 99th percentile of observed interest rate changes using a 1-year holding
period and 5 years of observations).

■ Composition, by Industry, of Listed Equity Portfolio

(March 31, 2008)

The market occasionally undergoes extreme fluctuations that

exceed projections. To manage market risk, therefore, it is impor-

tant to run simulations of situations that may occur only once in

many years (stress tests). At SMBC, monthly stress tests using

scenarios of past market fluctuations, those not related to past

market fluctuations, and specific-factor driven market fluctuations

are conducted to prepare for unforeseeable swings.

(d) Outlier Framework

In the event the economic value of a bank declines by more than

20% of the sum of Tier I and Tier II capital (“outlier ratio”) as a

result of interest rate shocks, the bank falls into the category of

“outlier bank”, as stipulated under the Second Pillar of Basel II.

As of March 31, 2008, the outlier ratio was less than 6%, sub-

stantially below the 20% criterion.

(e) Managing Risk of Stocks Held for Strategic Purposes

The Corporate Risk Management Department establishes limits on

allowable risk for strategic equity investments, and monitors the

observance of those limits to keep stock price fluctuation risk

within acceptable parameters.

SMBC aims to keep the stock price fluctuation risk associated

with its strategic equity investments at a level appropriate to the

financial strength of the bank. To achieve this, we have been

reducing the balance of our strategic stock holdings, and the bal-

ance now stands at approximately 50% of Tier I capital.

(2) Liquidity Risk

At SMBC, liquidity risk is regarded as one of the major risks. So as

not to be overly dependent on market-based funding to cover

funding sources, and establishing contingency plans.

short-term cash outflows, SMBC’s liquidity risk management is

In daily risk management operations, SMBC prevents a cumu-

based on a framework consisting of setting funding gap limits and

lative increase in liquidity risk by setting the funding gap limits and

guidelines, maintaining a system of highly liquid supplementary

guidelines. For emergency situations, there are contingency plans

SMFG 2008

SMFG 2008 45

3. Market and Liquidity Risk Management Methods
(1) Market Risk Management

(b) Back-Testing Results

The relationship between the VaR calculated with the model and

The bank manages market risk by setting maximum limits for

the actual profit and loss data is back-tested daily. The back-test-

“VaR” and maximum loss. These limits are set within the “market

ing results for SMBC’s trading accounts for fiscal 2007 are shown

risk capital limit” which is determined taking into account the

below. A data point below the diagonal line indicates a loss in

bank’s shareholders’ equity and other principal indicators of the

excess of the predicted VaR for that day; however, as in fiscal

bank’s financial position and management resources.

2006, there were no such excess losses during fiscal 2007. This

Market risk can be divided into various factors: foreign

demonstrates that the SMBC VaR model, with a one-sided confi-

exchange rate, interest rate, equity price, and option risks. Fine-

dence interval of 99.0%, is sufficiently reliable.

tuned management of each risk category is achieved by

employing the VaR method in conjunction with suitable indicators

for managing the risk of individual financial instruments such as

the BPV indicator.

Please note that, in the case of interest rate fluctuation risk, the

methods for recognizing the dates for maturity of demand deposits

(current accounts and ordinary deposit accounts that can be with-

drawn at any time) and the method for estimating the time of

cancellation prior to maturity of time deposits and consumer hous-

ing loans differ substantially. At SMBC, the maturity of demand

deposits that are expected to be left with the bank for a prolonged

period is regarded to be five years (2.5 years on average). The

cancellation prior to maturity of time deposits and consumer hous-

ing loans is estimated based on historical data.

(a) VaR Results

The results of VaR calculations for fiscal 2007 are shown in the

table below. SMBC’s internal VaR model makes use of historical

data to prepare scenarios for market fluctuations, and, by con-

ducting simulations of gains and losses, the model estimates the

maximum losses that may occur. (This is known as the historical

simulation method.) This internal SMBC model is evaluated period-

ically by an independent auditing firm to assess its

appropriateness and accuracy.

■ VaR Results

2. BPV (Basis point value)
The amount of change in assessed value as a result of a one
basis point (0.01%) movement in interest rates.

3. Trading
A market operation for generating profit by taking advantage of
short-term fluctuations in market values and differences in value
among markets.

4. Banking
A market operation for generating profit through management of
interest rates, terms, and other aspects of assets (loans, bonds,
etc.) and liabilities (deposits, etc.).

■ Back-Testing Results (Trading Book)

SMFG (consolidated) SMBC (consolidated) SMBC (non-consolidated)

■ Decline in Economic Value Based on Outlier Framework

(Billions of yen)

SMBC (consolidated)

SMBC (non-consolidated)

March 31, 2007 March 31, 2008 March 31, 2007 March 31, 2008

165.8

119.7

33.6

3.4

407.4

154.2

196.1

36.7

151.3

112.5

28.1

2.9

398.5

149.7

193.9

36.6

Total
Impact of yen
interest rates
Impact of U.S. dollar
interest rates
Impact of Euro
interest rates

Percentage of Tier I + Tier II

2.1%

5.4%

2.1%

5.8%

Note: “Decline in economic value” is the decline of present value after interest rate shocks

(1st and 99th percentile of observed interest rate changes using a 1-year holding
period and 5 years of observations).

■ Composition, by Industry, of Listed Equity Portfolio

(March 31, 2008)

The market occasionally undergoes extreme fluctuations that

exceed projections. To manage market risk, therefore, it is impor-

tant to run simulations of situations that may occur only once in

many years (stress tests). At SMBC, monthly stress tests using

scenarios of past market fluctuations, those not related to past

market fluctuations, and specific-factor driven market fluctuations

are conducted to prepare for unforeseeable swings.

(d) Outlier Framework

In the event the economic value of a bank declines by more than

20% of the sum of Tier I and Tier II capital (“outlier ratio”) as a

result of interest rate shocks, the bank falls into the category of

“outlier bank”, as stipulated under the Second Pillar of Basel II.

As of March 31, 2008, the outlier ratio was less than 6%, sub-

stantially below the 20% criterion.

(e) Managing Risk of Stocks Held for Strategic Purposes

The Corporate Risk Management Department establishes limits on

allowable risk for strategic equity investments, and monitors the

observance of those limits to keep stock price fluctuation risk

within acceptable parameters.

SMBC aims to keep the stock price fluctuation risk associated

with its strategic equity investments at a level appropriate to the

financial strength of the bank. To achieve this, we have been

reducing the balance of our strategic stock holdings, and the bal-

ance now stands at approximately 50% of Tier I capital.

(2) Liquidity Risk

At SMBC, liquidity risk is regarded as one of the major risks. So as

not to be overly dependent on market-based funding to cover

funding sources, and establishing contingency plans.

short-term cash outflows, SMBC’s liquidity risk management is

In daily risk management operations, SMBC prevents a cumu-

based on a framework consisting of setting funding gap limits and

lative increase in liquidity risk by setting the funding gap limits and

guidelines, maintaining a system of highly liquid supplementary

guidelines. For emergency situations, there are contingency plans

SMFG 2008

SMFG 2008 45

in place to reduce the funding gap limits and guidelines and other

whole Group by establishing an effective system for identification,

scenarios in each business process through a regular risk control

Internal Control Factors (BEICFs), and scenarios analysis through

measures. To prevent the possibility of market crises interfering

assessment, controlling, and monitoring of material operational risk

assessment to estimate the loss severity and frequency. Opera-

risk control assessments. In addition, the operational risk equiva-

with funding, SMBC carries highly liquid assets, such as U.S. Trea-

and a system for executing contingency and business continuity

tional risk impact is assessed for each risk scenario. When

lent amount (hereinafter, “required capital”) calculated under the

sury securities, and has emergency borrowing facilities in place,

plans. In view of the inclusion of operational risk in the framework

high-severity scenarios are identified, each branch/department

AMA must cover the maximum loss comparable to a one-year

which also enable foreign currency-denominated liquidity manage-

of the capital adequacy requirements of Basel II, SMFG has been

establishes a risk mitigation plan and the Operational Risk

holding period and a 99.9 percentile confidence interval.

ment.

Operational Risk
1. Basic Approach to Operational Risk Management
(1) Definition of Operational Risk

Operational risk is the risk of loss resulting from inadequate or

working on a continuing basis to create a more sophisticated

quantification model and to enhance operational risk management

throughout the Group.

2. Operational Risk Management System
SMFG has designed and implemented an operational risk

Management Department monitors the progress. Furthermore,

The basic framework of the AMA quantification model of SMFG

operational risk is quantified using the internal loss data and sce-

and SMBC is outlined in the diagram below. Among the four ele-

narios, and the results of quantification are used to manage and

ments, internal loss data and the results of scenarios analysis

reduce operational risk.

through risk control assessment are input directly into the quantifi-

The generation of internal loss data, scenarios identified

cation model described later in this section to calculate required

through risk control assessments, and status of risk mitigation

capital and risk-weighted assets (= required capital divided by

failed internal processes, people and systems or from external

management framework for Groupwide basic policies for risk

activities are regularly reported to the director in charge of the

8%). In addition, external loss data and BEICFs are used in verify-

events. Specifically, Basel II (The New Basel Capital Accord)---

management.

Operational Risk Management Department. In addition, there is

ing the assessment of scenarios, along with internal loss data, to

which, in addition to processing risk and system risk, also covers

At SMBC, the Management Committee makes decisions on

the Operational Risk Committee, comprising all relevant units of

increase objectivity, accuracy, and completeness.

legal risk, personnel risk, and physical asset risk---defines the fol-

important matters such as basic policies for operational risk man-

the bank, where operational risk information is reported and risk

The specific content and method of collection and use of the

lowing seven types of events that may lead to the risk of loss: (1)

agement, and these decisions are authorized by the SMBC Board

mitigation plans are discussed. In this way, we realize a highly

four elements are described below. At present, 18 Group compa-

internal fraud, (2) external fraud, (3) employment practices and

of Directors. In addition, SMBC has established its Operational

effective operational risk management framework. The operational

nies have adopted the AMA, including SMFG and SMBC, and all

workplace safety, (4) clients, products and business practices, (5)

Risk Management Department, within its General Affairs Depart-

risk situation is also reported to the Management Committee and

Group companies collect and make use of the four elements.

damage to physical assets, (6) business disruption and system

ment, as an integrated operational risk management department.

failures, and (7) execution, delivery, and process management.

This department works together with the Corporate Risk Manage-

ment Department, which is responsible for the quantification of

(2) Fundamental Principles for Operational Risk Management

operational risk, and with other departments responsible for con-

SMFG and SMBC have drawn up the Regulations on Operational

trolling processing risk and system risk.

Risk Management to define the basic rules to be observed in the

The operational risk management framework is described in

conduct of operational risk management across the entire Group.

more detail in the later part of this section, but it can be outlined as

Under these regulations, SMFG and SMBC have been working to

follows: operational risk is managed by (1) collecting and analyz-

enhance the operational risk management framework across the

ing internal loss data and (2) comprehensively identifying risk

■ SMBC’s Operational Risk Management System

■ Basic Framework of Operational Risk Measurement of SMFG and SMBC

the Board of Directors on a regular basis, for review of the basic

policies on operational risk management. Moreover, the bank’s

Internal Audit Department conducts periodic audits to ensure that

the operational risk management system is functioning properly.

3. Operational Risk Management Methodology
As previously defined, operational risk covers a wide range of

events, including the risk of losses due to errors in operation, sys-

tem failures, and natural disasters. Also, operational risk events

can occur virtually anywhere and everywhere. Thus, it is essential

to check whether material operational risks have been overlooked,

monitor the overall status of risks, and manage/control them. To

this end, it is necessary to be able to quantify risks using a mea-

surement methodology that can be applied to all types of

operational risk, and to comprehensively and comparatively cap-

ture the status of and changes in potential operational risks of

business processes. Also, from the viewpoint of internal control,

the measurement methodology used to a create risk mitigation

plan must be such that the implementation of the plan quantita-

tively reduces operational risk.

SMFG and SMBC have received an approval from Japan’s

Financial Services Agency for the application of the Advanced

Measurement Approaches (AMA), which is the most sophisticated

measurement method out of the three cited methods under Basel

II for measurement of operational risk. SMFG and SMBC have

adopted the AMA for operational risk management and for calcu-

lating operational risk-weighted assets. It was used for calculating

the March-end 2008 capital adequacy ratio.

When using the AMA, regulations require that the internal

measurement system (hereinafter, the “quantification model”) must

use four data elements (hereinafter, the “four elements”): namely,

internal loss data, external loss data, Business Environment and

SMFG 2008

SMFG 2008 47

in place to reduce the funding gap limits and guidelines and other

whole Group by establishing an effective system for identification,

scenarios in each business process through a regular risk control

Internal Control Factors (BEICFs), and scenarios analysis through

measures. To prevent the possibility of market crises interfering

assessment, controlling, and monitoring of material operational risk

assessment to estimate the loss severity and frequency. Opera-

risk control assessments. In addition, the operational risk equiva-

with funding, SMBC carries highly liquid assets, such as U.S. Trea-

and a system for executing contingency and business continuity

tional risk impact is assessed for each risk scenario. When

lent amount (hereinafter, “required capital”) calculated under the

sury securities, and has emergency borrowing facilities in place,

plans. In view of the inclusion of operational risk in the framework

high-severity scenarios are identified, each branch/department

AMA must cover the maximum loss comparable to a one-year

which also enable foreign currency-denominated liquidity manage-

of the capital adequacy requirements of Basel II, SMFG has been

establishes a risk mitigation plan and the Operational Risk

holding period and a 99.9 percentile confidence interval.

ment.

Operational Risk
1. Basic Approach to Operational Risk Management
(1) Definition of Operational Risk

Operational risk is the risk of loss resulting from inadequate or

working on a continuing basis to create a more sophisticated

quantification model and to enhance operational risk management

throughout the Group.

2. Operational Risk Management System
SMFG has designed and implemented an operational risk

Management Department monitors the progress. Furthermore,

The basic framework of the AMA quantification model of SMFG

operational risk is quantified using the internal loss data and sce-

and SMBC is outlined in the diagram below. Among the four ele-

narios, and the results of quantification are used to manage and

ments, internal loss data and the results of scenarios analysis

reduce operational risk.

through risk control assessment are input directly into the quantifi-

The generation of internal loss data, scenarios identified

cation model described later in this section to calculate required

through risk control assessments, and status of risk mitigation

capital and risk-weighted assets (= required capital divided by

failed internal processes, people and systems or from external

management framework for Groupwide basic policies for risk

activities are regularly reported to the director in charge of the

8%). In addition, external loss data and BEICFs are used in verify-

events. Specifically, Basel II (The New Basel Capital Accord)---

management.

Operational Risk Management Department. In addition, there is

ing the assessment of scenarios, along with internal loss data, to

which, in addition to processing risk and system risk, also covers

At SMBC, the Management Committee makes decisions on

the Operational Risk Committee, comprising all relevant units of

increase objectivity, accuracy, and completeness.

legal risk, personnel risk, and physical asset risk---defines the fol-

important matters such as basic policies for operational risk man-

the bank, where operational risk information is reported and risk

The specific content and method of collection and use of the

lowing seven types of events that may lead to the risk of loss: (1)

agement, and these decisions are authorized by the SMBC Board

mitigation plans are discussed. In this way, we realize a highly

four elements are described below. At present, 18 Group compa-

internal fraud, (2) external fraud, (3) employment practices and

of Directors. In addition, SMBC has established its Operational

effective operational risk management framework. The operational

nies have adopted the AMA, including SMFG and SMBC, and all

workplace safety, (4) clients, products and business practices, (5)

Risk Management Department, within its General Affairs Depart-

risk situation is also reported to the Management Committee and

Group companies collect and make use of the four elements.

damage to physical assets, (6) business disruption and system

ment, as an integrated operational risk management department.

failures, and (7) execution, delivery, and process management.

This department works together with the Corporate Risk Manage-

ment Department, which is responsible for the quantification of

(2) Fundamental Principles for Operational Risk Management

operational risk, and with other departments responsible for con-

SMFG and SMBC have drawn up the Regulations on Operational

trolling processing risk and system risk.

Risk Management to define the basic rules to be observed in the

The operational risk management framework is described in

conduct of operational risk management across the entire Group.

more detail in the later part of this section, but it can be outlined as

Under these regulations, SMFG and SMBC have been working to

follows: operational risk is managed by (1) collecting and analyz-

enhance the operational risk management framework across the

ing internal loss data and (2) comprehensively identifying risk

■ SMBC’s Operational Risk Management System

■ Basic Framework of Operational Risk Measurement of SMFG and SMBC

the Board of Directors on a regular basis, for review of the basic

policies on operational risk management. Moreover, the bank’s

Internal Audit Department conducts periodic audits to ensure that

the operational risk management system is functioning properly.

3. Operational Risk Management Methodology
As previously defined, operational risk covers a wide range of

events, including the risk of losses due to errors in operation, sys-

tem failures, and natural disasters. Also, operational risk events

can occur virtually anywhere and everywhere. Thus, it is essential

to check whether material operational risks have been overlooked,

monitor the overall status of risks, and manage/control them. To

this end, it is necessary to be able to quantify risks using a mea-

surement methodology that can be applied to all types of

operational risk, and to comprehensively and comparatively cap-

ture the status of and changes in potential operational risks of

business processes. Also, from the viewpoint of internal control,

the measurement methodology used to a create risk mitigation

plan must be such that the implementation of the plan quantita-

tively reduces operational risk.

SMFG and SMBC have received an approval from Japan’s

Financial Services Agency for the application of the Advanced

Measurement Approaches (AMA), which is the most sophisticated

measurement method out of the three cited methods under Basel

II for measurement of operational risk. SMFG and SMBC have

adopted the AMA for operational risk management and for calcu-

lating operational risk-weighted assets. It was used for calculating

the March-end 2008 capital adequacy ratio.

When using the AMA, regulations require that the internal

measurement system (hereinafter, the “quantification model”) must

use four data elements (hereinafter, the “four elements”): namely,

internal loss data, external loss data, Business Environment and

SMFG 2008

SMFG 2008 47

(1) Internal Loss Data

(4) Scenario Analysis through Risk Control Assessments

As an effective mechanism for mitigating risks, the maximum

operational risk losses for Group companies other than those

Internal loss data are defined as “the information on events in which

Risk control assessment is defined as “risk management method-

loss occurring once in 100 years (“scenario exposure”) is calcu-

applying the AMA. Then, the required capital and risk-weighted

SMFG and SMBC incur losses resulting from the realization of

ology to (a) identify material operational risks, and describe them

lated for each scenario derived through the risk control

assets for SMFG and the SMBC Group are measured by aggregat-

operational risk.” At SMFG and SMBC, internal loss data are col-

in terms of risk scenarios, (b) assess the risks and the effective-

assessment, and then a magnitude rating is provided by classify-

ing these figures.

lected for all cases where the gross loss amount is at least one yen

ness of controls, and (c) estimate the frequency and severity of

ing them into five categories according to the severity of loss. Risk

The outline of the quantification model for SMBC is as follows.

(the threshold amount), and seven years of internal loss data are

risk scenarios.” SMFG and SMBC apply this methodology to their

mitigation plans are developed by the relevant business units for

First, we generate a loss frequency distribution (number of loss

directly used in the quantification of required capital for operational

principal business activities.

risk.

(2) External Loss Data

The purpose of risk control assessment is to identify material

and potential operational risks pertinent to business processes, to

measure them, and to develop and carry out a risk mitigation plan

those scenarios with high-severity risk identified through magni-

incidents over a one-year period) based on the number of histori-

tude rating.

cal internal losses. Then, we generate a loss severity distribution

The principal features of this risk control assessment method

(amount of loss per loss incident) based on internal losses and

are (1) “objectivity”, which is realized by estimating the frequency

frequency of “low-frequency and high-severity” events obtained

External loss data are defined as “the information on events in

to manage the risks. Another purpose of risk control assessment is

of losses based on historical internal loss experience and by

through the risk control assessment.

which other banks, etc., incur losses resulting from the realization

to estimate the frequency of low-frequency and high-severity

estimating the severity of losses based on the transaction amounts

By using the loss severity and loss frequency distributions, the

of operational risk.” SMFG and other Group companies collect

events for each scenario (which may be difficult to estimate using

pertinent to the scenarios, and (2) an appropriate level of “sensitiv-

aggregated loss severity distribution is generated by conducting

external loss data where such losses may occur within the Group.

internal loss data alone).

ity” because changes in the business environment and the

Monte Carlo simulations and by generating various combinations

Please note that SMFG and SMBC have compiled external loss

During the process of periodic risk control assessment, opera-

implementation of risk mitigation measures can be reflected in the

of loss occurrence and loss amount which are simulated by

data for more than 5,000 cases over the past seven years, which

tional risks inherent in various business processes are recognized

frequency and severity of losses by changing the assessment of

changing these two factors. 99.0% VaR is calculated from the

are indirectly used in quantifying required capital for operational

as “scenarios.” The risk and control conditions for each scenario

risk and control as well as transactions amounts.

resulting aggregated loss severity distribution.

risk.

are assessed, and the frequency of occurrence and amount of

losses are estimated based on them. The assessment process

(5) Measurement Using Quantification Models

tioned later in the section of “Capital Ratio Information” to compute

Finally, we multiply 99.0% VaR by a conversion factor men-

(3) Business Environment and Internal Control Factors (BEICFs)

comprises three steps: (i) initial assessment, (ii) Operational Risk

SMFG, SMBC, and other Group companies using the AMA measure

99.9% VaR.

BEICFs are defined as “indicators of operational risk profiles of

Management Department review, and (iii) final assessment.

the maximum operational loss with a 99.9 percentile confidence

This quantification model takes into account not only empirical

SMFG and SMBC that reflect underlying business risk factors and

Through the process, the frequency of “low-frequency and high-

interval and a holding period of one year (hereinafter referred to as

internal loss data but also potential risk (scenarios) identified in the

an assessment of the effectiveness of the internal control factors.”

severity” events for each scenario are estimated in terms of four

99.9% VaR) by using the four elements. In addition, 99.9% VaR is

risk control assessment. An important feature of this model is that it

The Group periodically collects data relating to changes in laws

loss amounts (¥100 million, ¥1 billion, ¥5 billion, and ¥10 billion).

measured on an SMFG consolidated basis, SMBC consolidated

enables us to measure and reflect the “low-frequency and high

and regulations, changes in internal rules and process, and launch

Please note that SMFG and SMBC have identified more than 8,000

basis, and SMBC nonconsolidated basis. The operational risk is

severity” events of operational risk. Moreover, by introducing a

of new business and products pertinent to the Group’s business

risk scenarios for the Group on a consolidated basis.

measured for each of seven event types defined under Basel II,

conversion factor, it is unnecessary to directly estimate 99.9% VaR,

operations.

■ Flowchart for Risk Control Assessment (Example)

and then, by calculating the simple sum for all event types, 99.9%

which tends to have a lower accuracy, and stable estimation

VaR is measured for each company applying the AMA. Meanwhile,

results can be obtained by estimating 99.0% VaR which can be

the Basic Indicator Approach is applied to estimate maximum

estimated with higher accuracy.

SMFG 2008

SMFG 2008 49

(1) Internal Loss Data

(4) Scenario Analysis through Risk Control Assessments

As an effective mechanism for mitigating risks, the maximum

operational risk losses for Group companies other than those

Internal loss data are defined as “the information on events in which

Risk control assessment is defined as “risk management method-

loss occurring once in 100 years (“scenario exposure”) is calcu-

applying the AMA. Then, the required capital and risk-weighted

SMFG and SMBC incur losses resulting from the realization of

ology to (a) identify material operational risks, and describe them

lated for each scenario derived through the risk control

assets for SMFG and the SMBC Group are measured by aggregat-

operational risk.” At SMFG and SMBC, internal loss data are col-

in terms of risk scenarios, (b) assess the risks and the effective-

assessment, and then a magnitude rating is provided by classify-

ing these figures.

lected for all cases where the gross loss amount is at least one yen

ness of controls, and (c) estimate the frequency and severity of

ing them into five categories according to the severity of loss. Risk

The outline of the quantification model for SMBC is as follows.

(the threshold amount), and seven years of internal loss data are

risk scenarios.” SMFG and SMBC apply this methodology to their

mitigation plans are developed by the relevant business units for

First, we generate a loss frequency distribution (number of loss

directly used in the quantification of required capital for operational

principal business activities.

risk.

(2) External Loss Data

The purpose of risk control assessment is to identify material

and potential operational risks pertinent to business processes, to

measure them, and to develop and carry out a risk mitigation plan

those scenarios with high-severity risk identified through magni-

incidents over a one-year period) based on the number of histori-

tude rating.

cal internal losses. Then, we generate a loss severity distribution

The principal features of this risk control assessment method

(amount of loss per loss incident) based on internal losses and

are (1) “objectivity”, which is realized by estimating the frequency

frequency of “low-frequency and high-severity” events obtained

External loss data are defined as “the information on events in

to manage the risks. Another purpose of risk control assessment is

of losses based on historical internal loss experience and by

through the risk control assessment.

which other banks, etc., incur losses resulting from the realization

to estimate the frequency of low-frequency and high-severity

estimating the severity of losses based on the transaction amounts

By using the loss severity and loss frequency distributions, the

of operational risk.” SMFG and other Group companies collect

events for each scenario (which may be difficult to estimate using

pertinent to the scenarios, and (2) an appropriate level of “sensitiv-

aggregated loss severity distribution is generated by conducting

external loss data where such losses may occur within the Group.

internal loss data alone).

ity” because changes in the business environment and the

Monte Carlo simulations and by generating various combinations

Please note that SMFG and SMBC have compiled external loss

During the process of periodic risk control assessment, opera-

implementation of risk mitigation measures can be reflected in the

of loss occurrence and loss amount which are simulated by

data for more than 5,000 cases over the past seven years, which

tional risks inherent in various business processes are recognized

frequency and severity of losses by changing the assessment of

changing these two factors. 99.0% VaR is calculated from the

are indirectly used in quantifying required capital for operational

as “scenarios.” The risk and control conditions for each scenario

risk and control as well as transactions amounts.

resulting aggregated loss severity distribution.

risk.

are assessed, and the frequency of occurrence and amount of

losses are estimated based on them. The assessment process

(5) Measurement Using Quantification Models

tioned later in the section of “Capital Ratio Information” to compute

Finally, we multiply 99.0% VaR by a conversion factor men-

(3) Business Environment and Internal Control Factors (BEICFs)

comprises three steps: (i) initial assessment, (ii) Operational Risk

SMFG, SMBC, and other Group companies using the AMA measure

99.9% VaR.

BEICFs are defined as “indicators of operational risk profiles of

Management Department review, and (iii) final assessment.

the maximum operational loss with a 99.9 percentile confidence

This quantification model takes into account not only empirical

SMFG and SMBC that reflect underlying business risk factors and

Through the process, the frequency of “low-frequency and high-

interval and a holding period of one year (hereinafter referred to as

internal loss data but also potential risk (scenarios) identified in the

an assessment of the effectiveness of the internal control factors.”

severity” events for each scenario are estimated in terms of four

99.9% VaR) by using the four elements. In addition, 99.9% VaR is

risk control assessment. An important feature of this model is that it

The Group periodically collects data relating to changes in laws

loss amounts (¥100 million, ¥1 billion, ¥5 billion, and ¥10 billion).

measured on an SMFG consolidated basis, SMBC consolidated

enables us to measure and reflect the “low-frequency and high

and regulations, changes in internal rules and process, and launch

Please note that SMFG and SMBC have identified more than 8,000

basis, and SMBC nonconsolidated basis. The operational risk is

severity” events of operational risk. Moreover, by introducing a

of new business and products pertinent to the Group’s business

risk scenarios for the Group on a consolidated basis.

measured for each of seven event types defined under Basel II,

conversion factor, it is unnecessary to directly estimate 99.9% VaR,

operations.

■ Flowchart for Risk Control Assessment (Example)

and then, by calculating the simple sum for all event types, 99.9%

which tends to have a lower accuracy, and stable estimation

VaR is measured for each company applying the AMA. Meanwhile,

results can be obtained by estimating 99.0% VaR which can be

the Basic Indicator Approach is applied to estimate maximum

estimated with higher accuracy.

SMFG 2008

SMFG 2008 49

Please note that the accuracy of quantification model outputs

and SMBC implement risk mitigation measures to high-severity risk

described above is secured through the regular ex ante and ex

scenarios identified in the previously mentioned magnitude rating.

4. Processing Risk
Processing risk is the possibility of losses arising from negligent

To prevent any computer system breakdowns, we have taken

numerous measures, including the duplication of various systems

post facto verification processes.

In addition to the above, the operational risk-weighted assets

processing by employees, accidents, or unauthorized activities.

and infrastructures, constant maintenance of our computer system

The breakdown of risk-weighted assets by event type for the

calculated using the quantification methods are allocated to the

SMFG recognizes that all operations entail processing risk. We

to ensure steady, uninterrupted operation, and the establishment

Group on a consolidated basis, computed with the previously

business units of SMBC and other Group companies, as part of

are, therefore, working to raise the level of sophistication of our

of a disaster-prevention system consisting of computer centers

described quantification method, is as follows.

initiatives to mitigate risk for the Group as a whole.

management of processing risk across the whole Group by ensur-

in eastern and western Japan. And to maintain the confidentiality

Specifically, (1) at the beginning of each fiscal year, the opera-

ing that each branch conducts its own regular investigations of

of customer information and prevent information leaks, sensitive

■ Breakdown of Consolidated Risk-Weighted Assets by Event Type

(As of March 31, 2008)

Event Type

(1) Internal fraud

(2) External fraud

(3) Employment practices and workplace safety

(4) Clients, products, and business practices

(5) Damage to physical assets

(6) Business disruption and systems failure

(7) Execution, delivery, and process management
Note: Only risk-weighted assets calculated under the AMA.

(6) Risk Mitigation Initiatives

Percentage

9 ％

8 ％

2 ％

8 ％

12 ％

4 ％

57 ％

tional risk-weighted assets calculated using the internal loss data

and the scenario exposure determined from the risk control

assessment are allocated to each business unit and Group com-

pany, (2) during the fiscal year, each business unit and Group

company work to prevent the realization of operational risk and

improve scenario control by implementing risk mitigation mea-

sures, (3) during the first and second halves of the fiscal year, the
measurements of risk-weighted assets of each business unit and

Group company and an analysis of factors causing the change

from the previous half-year period (including the frequency and

severity of scenario) are fed back to the business units and Group

companies for revising their plans, and, (4) finally, at the end of the

fiscal year, by comparing the planned versus actual results, we

endeavor to enhance the awareness of operational risk, improve

the effectiveness of operational risk management, and mitigate

To mitigate risk using the quantitative results of the AMA, SMFG

operational risk within the Group as a whole.

■ The Group’s Operational Risk Mitigation Activities on a Semi-Annual Basis

processing risk; minimizing losses in the event of processing

information is encrypted, unauthorized external access is blocked,

errors or negligence by drafting exhaustive contingency plans;

and all known countermeasures to secure data are implemented.

and carrying out thorough quantification of the risk under manage-

There are also contingency plans and training sessions held as

ment.

necessary to ensure full preparedness in the event of an emer-

In the administrative regulations of SMBC, in line with SMFG’s

gency. To maintain security, countermeasures are revised as new

Groupwide basic policies for risk management, the basic adminis-

technologies and usage patterns emerge.

trative regulations are defined as “comprehending the risks and
costs of administration and transaction processing, and managing

them accordingly,” and “seeking to raise the quality of administra-

Settlement Risk
Settlement risk is the possibility of a loss arising from a transaction

tion to deliver high-quality service to customers.” Adding new

that cannot be settled as planned. Because this risk comprises

policies or making major revisions to existing ones for processing

elements of several types of risk, including credit, liquidity, pro-

risk management requires the approval of both the Management

cessing, and systems risk, it requires interdisciplinary

Committee and the Board of Directors.

management.

In the administrative regulations, SMBC has also defined

At SMBC, the Operations Planning Department is responsible

specific rules for processing risk management. The rules allocate

for coordinating the management of settlement risk with the Credit

processing risk management tasks among six types of depart-

& Investment Planning Department, which oversees credit risk,

ments: operations planning departments, compliance

and the Corporate Risk Management Department, which oversees

departments, operations departments, transaction execution

liquidity risk.

departments (primarily front-office departments, branches, and

branch service offices), internal audit departments, and the cus-

tomer support departments. In addition, there is a specialized

group within the Operations Planning Department to strengthen

administrative procedures throughout the Group.

5. Systems Risk
Systems risk is the possibility of a loss arising from the failure,

malfunction, or unauthorized use of computer systems.

SMFG recognizes that reliable computer systems are essential

for the effective implementation of management strategy in view of

the IT revolution. We strive to minimize systems risk by drafting

regulations and specific management standards, including a

security policy. We also have contingency plans with the goal of

minimizing losses in the event of a system failure. The develop-

ment of such a systems risk management system ensures that the

Group as a whole is undertaking adequate risk management.

At SMBC, safety measures are strengthened according to risk

assessment based on the Financial Services Agency’s Financial

Inspection Manual, and the Security Guidelines published by the

Center for Financial Industry Information Systems (FISC).

Computer-related trouble at financial institutions now has

greater potential to impact the public, with systems risk diversify-

ing owing to the IT revolution, and the resulting expansion of

networks and the rise in the number of personal computer users.

SMFG 2008

SMFG 2008 51

Please note that the accuracy of quantification model outputs

and SMBC implement risk mitigation measures to high-severity risk

described above is secured through the regular ex ante and ex

scenarios identified in the previously mentioned magnitude rating.

4. Processing Risk
Processing risk is the possibility of losses arising from negligent

To prevent any computer system breakdowns, we have taken

numerous measures, including the duplication of various systems

post facto verification processes.

In addition to the above, the operational risk-weighted assets

processing by employees, accidents, or unauthorized activities.

and infrastructures, constant maintenance of our computer system

The breakdown of risk-weighted assets by event type for the

calculated using the quantification methods are allocated to the

SMFG recognizes that all operations entail processing risk. We

to ensure steady, uninterrupted operation, and the establishment

Group on a consolidated basis, computed with the previously

business units of SMBC and other Group companies, as part of

are, therefore, working to raise the level of sophistication of our

of a disaster-prevention system consisting of computer centers

described quantification method, is as follows.

initiatives to mitigate risk for the Group as a whole.

management of processing risk across the whole Group by ensur-

in eastern and western Japan. And to maintain the confidentiality

Specifically, (1) at the beginning of each fiscal year, the opera-

ing that each branch conducts its own regular investigations of

of customer information and prevent information leaks, sensitive

■ Breakdown of Consolidated Risk-Weighted Assets by Event Type

(As of March 31, 2008)

Event Type

(1) Internal fraud

(2) External fraud

(3) Employment practices and workplace safety

(4) Clients, products, and business practices

(5) Damage to physical assets

(6) Business disruption and systems failure

(7) Execution, delivery, and process management
Note: Only risk-weighted assets calculated under the AMA.

(6) Risk Mitigation Initiatives

Percentage

9 ％

8 ％

2 ％

8 ％

12 ％

4 ％

57 ％

tional risk-weighted assets calculated using the internal loss data

and the scenario exposure determined from the risk control

assessment are allocated to each business unit and Group com-

pany, (2) during the fiscal year, each business unit and Group

company work to prevent the realization of operational risk and

improve scenario control by implementing risk mitigation mea-

sures, (3) during the first and second halves of the fiscal year, the
measurements of risk-weighted assets of each business unit and

Group company and an analysis of factors causing the change

from the previous half-year period (including the frequency and

severity of scenario) are fed back to the business units and Group

companies for revising their plans, and, (4) finally, at the end of the

fiscal year, by comparing the planned versus actual results, we

endeavor to enhance the awareness of operational risk, improve

the effectiveness of operational risk management, and mitigate

To mitigate risk using the quantitative results of the AMA, SMFG

operational risk within the Group as a whole.

■ The Group’s Operational Risk Mitigation Activities on a Semi-Annual Basis

processing risk; minimizing losses in the event of processing

information is encrypted, unauthorized external access is blocked,

errors or negligence by drafting exhaustive contingency plans;

and all known countermeasures to secure data are implemented.

and carrying out thorough quantification of the risk under manage-

There are also contingency plans and training sessions held as

ment.

necessary to ensure full preparedness in the event of an emer-

In the administrative regulations of SMBC, in line with SMFG’s

gency. To maintain security, countermeasures are revised as new

Groupwide basic policies for risk management, the basic adminis-

technologies and usage patterns emerge.

trative regulations are defined as “comprehending the risks and
costs of administration and transaction processing, and managing

them accordingly,” and “seeking to raise the quality of administra-

Settlement Risk
Settlement risk is the possibility of a loss arising from a transaction

tion to deliver high-quality service to customers.” Adding new

that cannot be settled as planned. Because this risk comprises

policies or making major revisions to existing ones for processing

elements of several types of risk, including credit, liquidity, pro-

risk management requires the approval of both the Management

cessing, and systems risk, it requires interdisciplinary

Committee and the Board of Directors.

management.

In the administrative regulations, SMBC has also defined

At SMBC, the Operations Planning Department is responsible

specific rules for processing risk management. The rules allocate

for coordinating the management of settlement risk with the Credit

processing risk management tasks among six types of depart-

& Investment Planning Department, which oversees credit risk,

ments: operations planning departments, compliance

and the Corporate Risk Management Department, which oversees

departments, operations departments, transaction execution

liquidity risk.

departments (primarily front-office departments, branches, and

branch service offices), internal audit departments, and the cus-

tomer support departments. In addition, there is a specialized

group within the Operations Planning Department to strengthen

administrative procedures throughout the Group.

5. Systems Risk
Systems risk is the possibility of a loss arising from the failure,

malfunction, or unauthorized use of computer systems.

SMFG recognizes that reliable computer systems are essential

for the effective implementation of management strategy in view of

the IT revolution. We strive to minimize systems risk by drafting

regulations and specific management standards, including a

security policy. We also have contingency plans with the goal of

minimizing losses in the event of a system failure. The develop-

ment of such a systems risk management system ensures that the

Group as a whole is undertaking adequate risk management.

At SMBC, safety measures are strengthened according to risk

assessment based on the Financial Services Agency’s Financial

Inspection Manual, and the Security Guidelines published by the

Center for Financial Industry Information Systems (FISC).

Computer-related trouble at financial institutions now has

greater potential to impact the public, with systems risk diversify-

ing owing to the IT revolution, and the resulting expansion of

networks and the rise in the number of personal computer users.

SMFG 2008

SMFG 2008 51

Corporate Social Responsibility (CSR)

Initiatives for Enhancing Customer Satisfaction (CS) and Quality

Contributing to
the Sustainable Development of Society
As a new comprehensive financial services group for the 21st cen-

Key Points of CSR Activities
The key points of our CSR activities are as follows. First of all, we

have created a solid management framework, including corporate

tury, Sumitomo Mitsui Financial Group (SMFG) strives to respond

governance, internal auditing, compliance, and risk management

to the expectations of society, and, by fulfilling its responsibilities,

systems. Second, we offer higher added value to our four major

to earn the highest trust of society.

stakeholder groups in the following ways.

To earn such trust, we offer added value to four major stake-

• We endeavor to develop and prosper with our customers

holder groups and entities: namely, customers, shareholders and

by offering top-quality, high-value-added products and

the market, the environment and society, and our employees.

services.

Working closely with Group companies, SMFG is taking initiatives to enhance customer satisfaction and the quality of Group services
and products. SMFG calls meetings of its Group Customer Satisfaction Committee periodically to review reports based on analyses
of the Voice of the Customer (VOC) and discuss measures to increase customer satisfaction.

At SMBC, we created the Quality Management Department in April

establish bankwide CS enhancement measures.

2006, with the aim of drawing fully on VOC to make improvements

The Head Office departments also analyze the VOC data them-

in the bank’s business and management. The Quality Management

selves and employ the results to make improvements in products

Through these activities, the Group contributes to the sustainable

• We maintain sound management through disclosing

Department is primarily responsible for analyzing the VOC data.

and services.

development of society as a whole.

Basic CSR Policies
As a basis for implementing its CSR activities, SMFG has formu-

appropriate information, designing and operating robust

internal control systems, and managing to increase share-

holder value.

• We implement initiatives on a continuing and active basis to

lated a definition of CSR and a set of business ethics that articulate

contribute to society and preserve the natural environment.

its basic principles for the Group.

SMFG’s Definition of CSR

In the conduct of its business activities, SMFG fulfills its social responsibilities by
contributing to the sustainable development of society as a whole through offering
higher added value to (i) customers, (ii) shareholders and the market, (iii) the envi-
ronment and society, and (iv) employees.

Basic CSR Principles: SMFG Business Ethics

Ⅰ. Providing Customer-Centric Services

We intend to be a financial services group that has the complete trust and
support of our customers. For this purpose, we will always provide services that
meet the true needs of our customers to assure their satisfaction and earn confi-
dence in the Group.

Ⅱ. Maintaining Sound Management

We intend to be a financial services group that maintains fair, transparent, and
sound management based on the principle of self-responsibility. For this purpose,
along with earning the firm confidence of our shareholders, our customers, and
the general public, we take a long-term view of our business and operate it effi-
ciently, and actively disclose accurate business information about the Group.
Through these activities, we work to maintain continued growth based on a
sound financial position.

Ⅲ. Contributing to Social Development

We intend to be a financial services group that contributes to the healthy develop-
ment of society. For this purpose, we recognize the importance of our mission to
serve as a crucial part of the public infrastructure and also our social responsibili-
ties. Based on this recognition, we undertake business operations that contribute
to the steady development of Japan and the rest of the world, and endeavor, as a
good corporate citizen, to make a positive contribution to society.

Ⅳ. Creating a Free and Active Business Environment

We intend to be a financial services group for which all officers and employees
work with pride and commitment. For this purpose, we respect people and
develop employees with extensive professional knowledge and capabilities,
thereby creating a free and active business environment.

Ⅴ. Maintaining High Compliance Standards

We intend to be a financial services group that always keeps in mind the impor-
tance of compliance. For this purpose, we reflect our awareness of Business
Ethics in our business activities at all times. In addition, we respond promptly to
directives from auditors and inspectors. Through these actions, we observe all
laws and regulations, and uphold moral standards in our business practices.

• We work to foster a free and active business environment

that emphasizes respect for individuals and allows employ-

ees to realize their full potential.

Finally, we ultimately contribute to the continuing development

of society as a whole through all these activities.

■ Our Perspective on CSR

Making contributions to the sustainable development of society as a whole

For customers

For shareholders
and the market

For society and the
natural environment

For employees

CSR initiatives of Group

Offering
high-value-added
products and services

Conducting sound
management

Engaging in social,
community, and
environment-related
activities

Fostering a corporate
culture that
respects individuals

Building on a solid management structure
(with robust corporate governance, internal audit, compliance, risk management,
information disclosure, and other systems firmly in place)

Implementing CSR Activities and
Business Growth Strategies in Tandem
SMFG and the Group companies position CSR activities as the

basis for the effective implementation of business growth strate-

gies and conduct these activities in tandem with their strategies to

attain management objectives.

The proper conduct of CSR activities is clearly an integral part

of “management itself,” and commitment to serious implementa-

tion of CSR initiatives is the shortest path to reaching management

objectives.

SMFG 2008

Reports of this department are then discussed by the CS and Qual-

ity Improvement Committee, whose members include the chairman

and directors who are members of the bank’s Management Com-

CS and Quality Improvement Committee
CS and Quality Improvement Committee, which is chaired by the

mittee, and these reports are used proactively to enhance the

president of SMBC, meets periodically to hear reports on the spe-

satisfaction of our customers and the quality of our services.

In parallel with these activities, we are undertaking a wide

cific opinions that customers have expressed and to review the
fluctuations in the number of opinions expressed from month to

range of initiatives for improving customer satisfaction and quality.

month. The committee also receives reports on the results of

These include conducting questionnaire surveys to obtain the

analyses of VOC and proposals for improvements, and members

opinions of a broader range of customers by interviewing them at

of management represented on the committee listen to these

our branches and offices and via mail. Also, to provide services

reports and consider appropriate courses of action.

that will meet with greater customer satisfaction, we are conduct-

In addition, to instill the awareness of making our activities

ing related training and educational programs.

more customer centric, we prepare documents containing points

VOC Database
We have also created a VOC database, a record of the opinions that

based on specific examples and distribute these throughout the

bank. We also arrange for study meetings and implement other

measures, and the content of these activities is reported to mem-

our customers have expressed, principally at our branches, and are

bers of management for their consideration.

working to make this database widely available within the bank. In

Moreover, to enhance customer satisfaction and the quality of

addition, the data is analyzed and used by the Quality Management

our products and services from a broader point of view, we invite

Department to provide guidance to our branches and to make

specialists familiar with these and related areas to provide their

improvement proposals to the Head Office departments so they can

advice.

■ Activities to Obtain and Act on Voice Of the Customers

Guidance and measures

Directives

Related
departments

Opinions

Analysis

Reports

Customers

Branches
and
other offices

Inputs

VOC Database

Suggestions
for improvement

Response

Analysis/
management

Guidance and measures

Quality
Management
Dept.

Directives

Reports

Management
Committee

CS and
Quality
Improvement
Committee,
etc.

SMFG 2008 53

Corporate Social Responsibility (CSR)

Initiatives for Enhancing Customer Satisfaction (CS) and Quality

Contributing to
the Sustainable Development of Society
As a new comprehensive financial services group for the 21st cen-

Key Points of CSR Activities
The key points of our CSR activities are as follows. First of all, we

have created a solid management framework, including corporate

tury, Sumitomo Mitsui Financial Group (SMFG) strives to respond

governance, internal auditing, compliance, and risk management

to the expectations of society, and, by fulfilling its responsibilities,

systems. Second, we offer higher added value to our four major

to earn the highest trust of society.

stakeholder groups in the following ways.

To earn such trust, we offer added value to four major stake-

• We endeavor to develop and prosper with our customers

holder groups and entities: namely, customers, shareholders and

by offering top-quality, high-value-added products and

the market, the environment and society, and our employees.

services.

At SMBC, we created the Quality Management Department in April

establish bankwide CS enhancement measures.

2006, with the aim of drawing fully on VOC to make improvements

The Head Office departments also analyze the VOC data them-

in the bank’s business and management. The Quality Management

selves and employ the results to make improvements in products

Through these activities, the Group contributes to the sustainable

• We maintain sound management through disclosing

Department is primarily responsible for analyzing the VOC data.

and services.

development of society as a whole.

Basic CSR Policies
As a basis for implementing its CSR activities, SMFG has formu-

appropriate information, designing and operating robust

internal control systems, and managing to increase share-

holder value.

• We implement initiatives on a continuing and active basis to

lated a definition of CSR and a set of business ethics that articulate

contribute to society and preserve the natural environment.

its basic principles for the Group.

SMFG’s Definition of CSR

Basic CSR Principles: SMFG Business Ethics

Ⅰ. Providing Customer-Centric Services

Ⅱ. Maintaining Sound Management

Ⅲ. Contributing to Social Development

Ⅳ. Creating a Free and Active Business Environment

Ⅴ. Maintaining High Compliance Standards

• We work to foster a free and active business environment

that emphasizes respect for individuals and allows employ-

ees to realize their full potential.

Finally, we ultimately contribute to the continuing development

of society as a whole through all these activities.

■ Our Perspective on CSR

Making contributions to the sustainable development of society as a whole

For customers

For shareholders
and the market

For society and the
natural environment

For employees

CSR initiatives of Group

Offering
high-value-added
products and services

Conducting sound
management

Engaging in social,
community, and
environment-related
activities

Fostering a corporate
culture that
respects individuals

Building on a solid management structure
(with robust corporate governance, internal audit, compliance, risk management,
information disclosure, and other systems firmly in place)

Implementing CSR Activities and
Business Growth Strategies in Tandem
SMFG and the Group companies position CSR activities as the

basis for the effective implementation of business growth strate-

gies and conduct these activities in tandem with their strategies to

attain management objectives.

The proper conduct of CSR activities is clearly an integral part

of “management itself,” and commitment to serious implementa-

tion of CSR initiatives is the shortest path to reaching management

objectives.

SMFG 2008

Reports of this department are then discussed by the CS and Qual-

ity Improvement Committee, whose members include the chairman

and directors who are members of the bank’s Management Com-

CS and Quality Improvement Committee
CS and Quality Improvement Committee, which is chaired by the

mittee, and these reports are used proactively to enhance the

president of SMBC, meets periodically to hear reports on the spe-

satisfaction of our customers and the quality of our services.

In parallel with these activities, we are undertaking a wide

cific opinions that customers have expressed and to review the
fluctuations in the number of opinions expressed from month to

range of initiatives for improving customer satisfaction and quality.

month. The committee also receives reports on the results of

These include conducting questionnaire surveys to obtain the

analyses of VOC and proposals for improvements, and members

opinions of a broader range of customers by interviewing them at

of management represented on the committee listen to these

our branches and offices and via mail. Also, to provide services

reports and consider appropriate courses of action.

that will meet with greater customer satisfaction, we are conduct-

In addition, to instill the awareness of making our activities

ing related training and educational programs.

more customer centric, we prepare documents containing points

VOC Database
We have also created a VOC database, a record of the opinions that

based on specific examples and distribute these throughout the

bank. We also arrange for study meetings and implement other

measures, and the content of these activities is reported to mem-

our customers have expressed, principally at our branches, and are

bers of management for their consideration.

working to make this database widely available within the bank. In

Moreover, to enhance customer satisfaction and the quality of

addition, the data is analyzed and used by the Quality Management

our products and services from a broader point of view, we invite

Department to provide guidance to our branches and to make

specialists familiar with these and related areas to provide their

improvement proposals to the Head Office departments so they can

advice.

■ Activities to Obtain and Act on Voice Of the Customers

Guidance and measures

Directives

Related
departments

Opinions

Analysis

Reports

Customers

Branches
and
other offices

Inputs

VOC Database

Suggestions
for improvement

Response

Analysis/
management

Guidance and measures

Quality
Management
Dept.

Directives

Reports

Management
Committee

CS and
Quality
Improvement
Committee,
etc.

SMFG 2008 53

Corporate Governance

Internal Audit System

Our Stance on Corporate Governance
SMFG and its Group companies follow the SMFG management

three major Group companies, namely, Sumitomo Mitsui Card,

Sumitomo Mitsui Finance and Leasing, and JRI, the SMFG director

An Outline of the Group’s Internal Audit System
In addition to the SMFG Auditing Committee, which functions as a

compliance and the management of risk at SMBC’s Head Office

departments, its domestic and overseas branches, and at all other

philosophy as a universal guide for Group management and posi-

in charge of each of these subsidiaries serves as a part-time direc-

governance committee reporting to the Board of Directors, we

business offices of subsidiaries in Japan and overseas. Auditing of

tion this philosophy as the anchor for corporate action. To

tor of these companies.

have established the Internal Auditing Committee, which is a part

operations in Head Office departments focuses on material issues

implement the ideas contained in our Group philosophy, we

Furthermore, to maintain the soundness of management,

of the Group Management Committee to give a higher profile to

that arise in the management of specific operations and categories

believe one of the issues with highest priority is strengthening and

SMFG has established internal control systems to ensure the

the internal auditing functions and facilitate effective conduct of

of risk. These auditing activities emphasize the verification of “Tar-

improving our corporate governance system.

proper conduct of company operations following the Japanese

internal audits. The Internal Auditing Committee meets every quar-

geted Audit Items” across the whole of the bank’s organization.

The SMFG Corporate Governance System
SMFG employs the “corporate auditor” governance model in

Company Law. Designing and implementing an internal control

system, to strengthen management systems, is regarded as a

major issue, and initiatives are under way to enhance such internal

which statutory auditors oversee the execution of business by the

control systems.

directors. At SMFG, we have five corporate auditors, three of

whom are outside auditors. The auditors monitor the execution of

business operations of SMFG and its subsidiaries by attending

The SMBC Corporate Governance System
SMBC employs the corporate auditor governance model. Of the

meetings of the Board of Directors and listen to reports on opera-

six statutory auditors appointed, three are from outside the bank.

tions from the directors and others. They also examine documents

To ensure sound and transparent management, SMBC separates

relating to important decisions and receive reports from the inter-

the two functions of management decision making at the opera-

nal audit departments, representatives of subsidiaries of SMFG,

tional level and the overall supervision of the conduct of duties by

ter, and its members discuss important matters related to internal

Moreover, audits of branches and offices are not limited just to

auditing based on reports prepared by the departments responsi-

checking for control and other deficiencies but also include point-

ble for internal audits. There is also the Audit Department, which is

ing to any issues related to compliance and risk management and

an internal auditing unit that is independent of the operational

making recommendations for corrective action.

departments of the Group.

In other Group companies, internal audit departments have

The Audit Department conducts internal audits of the opera-

been formed suited to the respective nature of each company’s

tions of all the Group’s units and departments to contribute to

lines of business.

optimal management and ensure the proper conduct of the

Group’s operations and the soundness of its assets. These audits

also have the function of verifying that the Group’s internal control

systems, including compliance and risk management, are operat-

Initiatives to Enhance the Sophistication
and Efficiency of Internal Auditing
The Audit Department has adopted methods following the stan-

and the CPAs.

the management of the bank. For this purpose, the bank employs

ing appropriately and effectively. The Audit Department is also

dards of the Institute of Internal Auditors (IIA)*, an international

The chairman of SMFG serves as the chairman of the Board of

a system under which executive officers are responsible for opera-

responsible for the overall supervision of the internal audit systems

organization. The Audit Department conducts risk-based audits and

Directors of SMFG. This separates the role of the president, whose

tional duties, while the supervisory functions are performed

of Group companies. It monitors the appropriateness and effec-

works to apply best practices to Group companies.

responsibility is the overall supervision of business activities of

principally by the Board.

tiveness of the internal audit systems at Group companies by

To fulfill effectively its role as the department in overall charge

SMFG and other Group companies, from the role of supervising

The chairman of the bank serves as the chairman of the Board

verifying past data related to internal auditing and monitoring

of internal auditing, the Audit Department is constantly endeavor-

management. To enhance the effectiveness of the Board, we have

of Directors, and, to clearly separate his functions from those of the

activities, which include inspections and other activities based on

ing to advance the professional skills of personnel engaged in

appointed outside directors and formed four governance commit-

president of the bank, who is responsible for the overall supervi-

actual samples, and, when deemed necessary, by conducting

internal auditing. Activities include collecting the latest information

tees: namely, the Auditing Committee, the Risk Management

sion of the bank’s activities, the chairman does not simultaneously

audits. Based on these activities, the Audit Department provides

on internal auditing from inside and outside Japan and disseminat-

Committee, the Compensation Committee, and the Nominating

serve as an executive officer and is primarily responsible for

recommendations and guidance to the business units and depart-

ing it to all Group companies. Also, the Audit Department

Committee. Outside directors have been appointed to all four of

supervising management’s execution of their duties. As at SMFG

ments as well as Group companies.

organizes training courses, led by outside experts, for the staff of

these committees to provide for corporate governance from an

and to ensure a robust supervisory function, outside directors are

At SMBC, we have formed auditing departments that are inde-

Group companies and encourages them to obtain international

objective perspective. As the need for objectivity is particularly

appointed to the Board of Directors. At SMBC, three outside direc-

pendent of bank units involved in marketing and other business

qualifications to enhance their professional knowledge and skills in

acute in the case of the Auditing Committee and the Compensa-

tors currently serve on the Board, which has a total membership of

activities. Within the Internal Audit Unit of SMBC, we have formed

internal auditing. To improve further the effectiveness of auditing,

tion Committee, outside directors serve as the chairmen of these

thirteen.

two departments: the Internal Audit Department and the Credit

we also take active measures on a Groupwide basis to assess the

committees. To ensure that the execution of the Group’s business

Executive officers are appointed by the Board to manage the

Review Department. As at SMFG, SMBC has set up its Internal

quality of our internal auditing in the light of IIA standards.

operations is in conformity both with legal regulations and gener-

operation of SMBC’s businesses. As of June 30, 2008, SMBC has

ally accepted practices, the outside directors have been selected

70 executive officers, including the president, and eight serve con-

from among the ranks of specialists (including CPAs, lawyers, and

currently as directors. The Management Committee of SMBC is the

consultants).

highest decision-making body at the operational level and is under

SMFG has created the Group Management Committee to

the direct supervision of the Board of Directors. The president

serve as the top decision-making body, and it is under the direct

chairs this committee and selects its members from the executive

supervision of the Board of Directors and chaired by the president

officers. The committee members consider important management

of SMFG. This committee is composed of directors chosen by the

issues based on policies set by the Board of Directors, and the

president. Its role is to consider important matters related to the

president has the authority to make the final decision after consid-

execution of business and to make decisions for or against the

ering the committee’s recommendations.

execution of matters in accord with the basic policies of the Board

The president designates certain members of the Manage-

of Directors. SMFG also has a Group Strategy Committee that

ment Committee to be Authorized Management Committee

serves as a forum for the top managers of SMFG and all other

members in charge of particular Head Office departments or units.

Group companies to exchange opinions and information on their

All of these designated individuals are in charge of implementing

respective business plans. To enable SMFG to monitor the execu-

the directives of the Management Committee within the businesses

tion of day-to-day business operations at SMBC, six SMFG

they oversee.

directors (including three outside directors) of the total of nine

SMFG directors (including three outside directors) also serve

as directors of SMBC. To monitor the conduct of operations at

SMFG 2008

Auditing Committee, which is a part of the Management Committee

and is responsible for examining and conducting deliberations on

reports on important matters submitted by the Internal Audit Unit.

SMBC’s Internal Audit Unit is responsible for auditing legal

* The Institute of Internal Auditors (IIA) was founded in 1941 in the United States as an
organization dedicated to helping raise the level of specialization and professionalism
of internal auditing staff. In addition to conducting theoretical and practical research on
internal auditing, the IIA administers examinations for Certified Internal Auditor ® (CIA®),
which is the internationally recognized qualification in this field.

SMFG

Shareholders’ Meeting

Corporate Auditors/
Board of Corporate Auditors

SMBC

Shareholders’ Meeting

Board of Directors

Corporate Auditors/
Board of Corporate Auditors

Office of Corporate Auditors

Board of Directors

Nominating
Committee

Compensation
Committee

Risk Management
Committee

Auditing
Committee

Group Strategy
Committee

Group Management Committee

Internal Auditing Committee

Business units subject to auditing

Office of Corporate Auditors

Management Committee

Internal Auditing Committee

Business units
subject to auditing

All Departments

Internal
audits

Audit
Department

Head Office/Business Units

Internal
audits

Internal Audit Unit
Internal Audit Department

Credit Review Department

M
o
n
i
t
o
r
i
n
g

Auditing

SMFG 2008 55

Corporate Governance

Internal Audit System

Our Stance on Corporate Governance
SMFG and its Group companies follow the SMFG management

three major Group companies, namely, Sumitomo Mitsui Card,

Sumitomo Mitsui Finance and Leasing, and JRI, the SMFG director

An Outline of the Group’s Internal Audit System
In addition to the SMFG Auditing Committee, which functions as a

compliance and the management of risk at SMBC’s Head Office

departments, its domestic and overseas branches, and at all other

philosophy as a universal guide for Group management and posi-

in charge of each of these subsidiaries serves as a part-time direc-

governance committee reporting to the Board of Directors, we

business offices of subsidiaries in Japan and overseas. Auditing of

tion this philosophy as the anchor for corporate action. To

tor of these companies.

have established the Internal Auditing Committee, which is a part

operations in Head Office departments focuses on material issues

implement the ideas contained in our Group philosophy, we

Furthermore, to maintain the soundness of management,

of the Group Management Committee to give a higher profile to

that arise in the management of specific operations and categories

believe one of the issues with highest priority is strengthening and

SMFG has established internal control systems to ensure the

the internal auditing functions and facilitate effective conduct of

of risk. These auditing activities emphasize the verification of “Tar-

improving our corporate governance system.

proper conduct of company operations following the Japanese

internal audits. The Internal Auditing Committee meets every quar-

geted Audit Items” across the whole of the bank’s organization.

The SMFG Corporate Governance System
SMFG employs the “corporate auditor” governance model in

Company Law. Designing and implementing an internal control

system, to strengthen management systems, is regarded as a

major issue, and initiatives are under way to enhance such internal

which statutory auditors oversee the execution of business by the

control systems.

directors. At SMFG, we have five corporate auditors, three of

whom are outside auditors. The auditors monitor the execution of

business operations of SMFG and its subsidiaries by attending

The SMBC Corporate Governance System
SMBC employs the corporate auditor governance model. Of the

meetings of the Board of Directors and listen to reports on opera-

six statutory auditors appointed, three are from outside the bank.

tions from the directors and others. They also examine documents

To ensure sound and transparent management, SMBC separates

relating to important decisions and receive reports from the inter-

the two functions of management decision making at the opera-

nal audit departments, representatives of subsidiaries of SMFG,

tional level and the overall supervision of the conduct of duties by

ter, and its members discuss important matters related to internal

Moreover, audits of branches and offices are not limited just to

auditing based on reports prepared by the departments responsi-

checking for control and other deficiencies but also include point-

ble for internal audits. There is also the Audit Department, which is

ing to any issues related to compliance and risk management and

an internal auditing unit that is independent of the operational

making recommendations for corrective action.

departments of the Group.

In other Group companies, internal audit departments have

The Audit Department conducts internal audits of the opera-

been formed suited to the respective nature of each company’s

tions of all the Group’s units and departments to contribute to

lines of business.

optimal management and ensure the proper conduct of the

Group’s operations and the soundness of its assets. These audits

also have the function of verifying that the Group’s internal control

systems, including compliance and risk management, are operat-

Initiatives to Enhance the Sophistication
and Efficiency of Internal Auditing
The Audit Department has adopted methods following the stan-

and the CPAs.

the management of the bank. For this purpose, the bank employs

ing appropriately and effectively. The Audit Department is also

dards of the Institute of Internal Auditors (IIA)*, an international

The chairman of SMFG serves as the chairman of the Board of

a system under which executive officers are responsible for opera-

responsible for the overall supervision of the internal audit systems

organization. The Audit Department conducts risk-based audits and

Directors of SMFG. This separates the role of the president, whose

tional duties, while the supervisory functions are performed

of Group companies. It monitors the appropriateness and effec-

works to apply best practices to Group companies.

responsibility is the overall supervision of business activities of

principally by the Board.

tiveness of the internal audit systems at Group companies by

To fulfill effectively its role as the department in overall charge

SMFG and other Group companies, from the role of supervising

The chairman of the bank serves as the chairman of the Board

verifying past data related to internal auditing and monitoring

of internal auditing, the Audit Department is constantly endeavor-

management. To enhance the effectiveness of the Board, we have

of Directors, and, to clearly separate his functions from those of the

activities, which include inspections and other activities based on

ing to advance the professional skills of personnel engaged in

appointed outside directors and formed four governance commit-

president of the bank, who is responsible for the overall supervi-

actual samples, and, when deemed necessary, by conducting

internal auditing. Activities include collecting the latest information

tees: namely, the Auditing Committee, the Risk Management

sion of the bank’s activities, the chairman does not simultaneously

audits. Based on these activities, the Audit Department provides

on internal auditing from inside and outside Japan and disseminat-

Committee, the Compensation Committee, and the Nominating

serve as an executive officer and is primarily responsible for

recommendations and guidance to the business units and depart-

ing it to all Group companies. Also, the Audit Department

Committee. Outside directors have been appointed to all four of

supervising management’s execution of their duties. As at SMFG

ments as well as Group companies.

organizes training courses, led by outside experts, for the staff of

these committees to provide for corporate governance from an

and to ensure a robust supervisory function, outside directors are

At SMBC, we have formed auditing departments that are inde-

Group companies and encourages them to obtain international

objective perspective. As the need for objectivity is particularly

appointed to the Board of Directors. At SMBC, three outside direc-

pendent of bank units involved in marketing and other business

qualifications to enhance their professional knowledge and skills in

acute in the case of the Auditing Committee and the Compensa-

tors currently serve on the Board, which has a total membership of

activities. Within the Internal Audit Unit of SMBC, we have formed

internal auditing. To improve further the effectiveness of auditing,

tion Committee, outside directors serve as the chairmen of these

thirteen.

two departments: the Internal Audit Department and the Credit

we also take active measures on a Groupwide basis to assess the

committees. To ensure that the execution of the Group’s business

Executive officers are appointed by the Board to manage the

Review Department. As at SMFG, SMBC has set up its Internal

quality of our internal auditing in the light of IIA standards.

operations is in conformity both with legal regulations and gener-

operation of SMBC’s businesses. As of June 30, 2008, SMBC has

ally accepted practices, the outside directors have been selected

70 executive officers, including the president, and eight serve con-

from among the ranks of specialists (including CPAs, lawyers, and

currently as directors. The Management Committee of SMBC is the

consultants).

highest decision-making body at the operational level and is under

SMFG has created the Group Management Committee to

the direct supervision of the Board of Directors. The president

serve as the top decision-making body, and it is under the direct

chairs this committee and selects its members from the executive

supervision of the Board of Directors and chaired by the president

officers. The committee members consider important management

of SMFG. This committee is composed of directors chosen by the

issues based on policies set by the Board of Directors, and the

president. Its role is to consider important matters related to the

president has the authority to make the final decision after consid-

execution of business and to make decisions for or against the

ering the committee’s recommendations.

execution of matters in accord with the basic policies of the Board

The president designates certain members of the Manage-

of Directors. SMFG also has a Group Strategy Committee that

ment Committee to be Authorized Management Committee

serves as a forum for the top managers of SMFG and all other

members in charge of particular Head Office departments or units.

Group companies to exchange opinions and information on their

All of these designated individuals are in charge of implementing

respective business plans. To enable SMFG to monitor the execu-

the directives of the Management Committee within the businesses

tion of day-to-day business operations at SMBC, six SMFG

they oversee.

directors (including three outside directors) of the total of nine

SMFG directors (including three outside directors) also serve

as directors of SMBC. To monitor the conduct of operations at

SMFG 2008

Auditing Committee, which is a part of the Management Committee

and is responsible for examining and conducting deliberations on

reports on important matters submitted by the Internal Audit Unit.

SMBC’s Internal Audit Unit is responsible for auditing legal

SMFG

Shareholders’ Meeting

Corporate Auditors/
Board of Corporate Auditors

SMBC

Shareholders’ Meeting

Board of Directors

Corporate Auditors/
Board of Corporate Auditors

Office of Corporate Auditors

Board of Directors

Nominating
Committee

Compensation
Committee

Risk Management
Committee

Auditing
Committee

Group Strategy
Committee

Group Management Committee

Internal Auditing Committee

Business units subject to auditing

Office of Corporate Auditors

Management Committee

Internal Auditing Committee

Business units
subject to auditing

All Departments

Internal
audits

Audit
Department

Head Office/Business Units

Internal
audits

Internal Audit Unit
Internal Audit Department

Credit Review Department

M
o
n
i
t
o
r
i
n
g

Auditing

SMFG 2008 55

Compliance

Compliance Systems at SMFG

Compliance at SMBC

Basic Compliance Policies
As a financial services group offering a multiplicity of products and

the state of autonomously implemented compliance functions at

those companies. The three main important areas for strengthen-

Strengthening Compliance Systems
Compliance with laws, regulations, and other social standards is a

Issuance of a Compliance Manual

To assist management and staff in choosing proper courses of

services, SMFG is intensifying its efforts to maintain high standards

ing oversight in fiscal 2008 are (a) the actual monitoring of

basic requirement for corporations in general. Especially for

action, SMBC has prepared its Compliance Manual containing 60

of compliance to carry out its mission as an important part of the

activities at Group companies; (b) ensuring strict observance of

banks, compliance is a particularly important issue because of

principles for action that provide objectives and guidance. This

nation’s public infrastructure and fulfill its social responsibilities.

Japan’s Anti-Monopoly Law; and (c) strengthening measures to

their public mission and social responsibilities as key players in the

manual has been approved by the Board of Directors, and all

Through these efforts, SMFG is becoming a truly outstanding

control conflicts of interest.

global corporate group.

At SMFG, we have positioned compliance as one of the princi-

pal supports of our Business Ethics (please refer to page 52),

Improvements in Monitoring Activities
As revisions are made in finance-related laws, such as Japan’s

financial system and socioeconomic infrastructure.

SMBC, in line with the basic policy of SMFG, requires all its

management and staff have been fully apprised of its contents.
Preparation of Compliance Programs

management and staff to assign the highest value to maintaining

With the objectives of ensuring that compliance systems function

people’s trust, abiding by relevant laws and regulations, upholding

effectively and making necessary improvement in compliance sys-

which serve as the basic principles for fulfilling our corporate

Financial Instruments and Exchange Act, close attention to regula-

high ethical standards, and acting fairly and sincerely. SMBC,

tems within SMBC and its consolidated subsidiaries, the Board of

social responsibility (CSR). Accordingly, we regard strengthening

tions and actions taken is even more important than in the past for

therefore, positions maintaining high standards of compliance as

Directors prepares a specific plan for compliance-related activities

our compliance systems as one of our top management priorities.

ensuring compliance. As a consequence, careful monitoring is

one of its most important management priorities.

each fiscal year, including review and necessary revisions of regu-

Group Management from
a Compliance Perspective
As a financial holding company, SMFG seeks to maintain and

needed for the early identification of signs of emerging problems

and for taking corrective action.

Accordingly, SMFG has prescribed methods for monitoring

activities of Group companies in its Compliance Manuals for

Management of the Compliance System
SMBC adopts a basic, two-tiered structure to ensure compliance.

lations and training. In fiscal 2008, activities in progress include

implementing measures for upgrading and increasing the effec-

tiveness of various monitoring activities, strengthening the

First, each department and office is held individually responsible

functions of compliance officers, continuing the various measures

enhance systems for providing appropriate direction, guidance,

Group Companies as well as procedures for supervising and

for making before the fact decisions that ensure its conduct com-

related to revisions in the Financial Instruments and Exchange Act,

and monitoring for the compliance and related systems of Group

auditing the implementation of these activities. By taking these

plies with laws and regulations. Second, an independent, Internal

changes in the regulations for the sale of insurance products

companies to ensure the sound and proper conduct of business

measures SMFG is working to strengthen its compliance systems

Auditing Unit conducts rigorous audits of department and branch

through bank branches, and strengthening systems, education,

activities throughout the entire Group.

through improvements in monitoring activities.

compliance.

Specific activities include holding regular meetings that are

attended by representatives of Group companies, as well as meet-

ings with individual companies, with the objective of overseeing

Corporate Auditors

Audit Dept.

Group Business
Management Dept.

Audit

Report

Sumitomo Mitsui Financial Group, Inc.

Board of Directors
Group Management Committee

Directions

Report

Discuss

Compliance Committees

General Affairs Dept.

Audit/
Monitoring
Group Company

Audit/
Monitoring

Compliance System
Oversight and Guidelines

Report

Departments and Offices
General Manager responsible for compliance
Compliance Officers to assist General Managers

Management

Report

Group Companies
SMBC, Sumitomo Mitsui Card, SMBC Leasing, JRI, and SMBC Friend Securities

To maintain this two-tiered structure and ensure it is operating

and training, as well as the monitoring of compliance.
Appointment of Compliance Officers

effectively, the Compliance Unit, which includes the General Affairs

In addition to the compliance officers appointed within the bank’s

Department and the Legal Department, plans and implements

departments and branches, we have appointed Area Compliance

systems and system improvements to secure compliance, acting

Officers, who are independent from frontline departments, within

under directions from management. The Compliance Unit also pro-

certain of our business units is including the Middle Market Bank-

vides guidance and conducts monitoring activities regarding the

ing Unit and the Consumer Banking Unit. These officers are

activities of all departments and branches, and assists depart-

responsible for directing and overseeing compliance regarding

ments and branches make compliance decisions.

transactions carried out by the staff of our branches and other

The framework of SMBC’s compliance system is shown in the

diagram at the bottom of this page. To ensure that this framework

frontline offices.
Formation of the Compliance Committee

functions effectively, SMBC also engages in the activities

To ensure that compliance issues related to various operations

described in the following paragraphs.

within the bank are reviewed and discussed comprehensively, we

have formed the Compliance Committee, which has members

drawn from across the organization. This committee is chaired by

the director responsible for compliance issues and includes the

heads of relevant departments. To enhance the fairness and

objectivity of the committee’s deliberations, outside members also

participate in the Compliance Committee meetings.

■ Overview of SMBC’s Compliance System

Board of Directors, Management Committee

Audit

Corporate Auditors

Directions

Report

Compliance Unit

Directions, Monitoring, and
Legal Support

Discuss

Compliance Committees
Consult

General Affairs Dept. (overall control), Legal Dept.

Head Office departments

Discuss

General
Manager

Area Compliance Officers

Report and Discuss

Front-line Offices
(Corporate Business Offices, Branches)
General Managers
Compliance Office

Internal Audit Dept.

SMFG 2008

SMFG 2008 57

Compliance Officers

Report

Audit

Compliance

Compliance Systems at SMFG

Compliance at SMBC

Basic Compliance Policies
As a financial services group offering a multiplicity of products and

the state of autonomously implemented compliance functions at

those companies. The three main important areas for strengthen-

Strengthening Compliance Systems
Compliance with laws, regulations, and other social standards is a

Issuance of a Compliance Manual

To assist management and staff in choosing proper courses of

services, SMFG is intensifying its efforts to maintain high standards

ing oversight in fiscal 2008 are (a) the actual monitoring of

basic requirement for corporations in general. Especially for

action, SMBC has prepared its Compliance Manual containing 60

of compliance to carry out its mission as an important part of the

activities at Group companies; (b) ensuring strict observance of

banks, compliance is a particularly important issue because of

principles for action that provide objectives and guidance. This

nation’s public infrastructure and fulfill its social responsibilities.

Japan’s Anti-Monopoly Law; and (c) strengthening measures to

their public mission and social responsibilities as key players in the

manual has been approved by the Board of Directors, and all

Through these efforts, SMFG is becoming a truly outstanding

control conflicts of interest.

global corporate group.

At SMFG, we have positioned compliance as one of the princi-

pal supports of our Business Ethics (please refer to page 52),

Improvements in Monitoring Activities
As revisions are made in finance-related laws, such as Japan’s

financial system and socioeconomic infrastructure.

SMBC, in line with the basic policy of SMFG, requires all its

management and staff have been fully apprised of its contents.
Preparation of Compliance Programs

management and staff to assign the highest value to maintaining

With the objectives of ensuring that compliance systems function

people’s trust, abiding by relevant laws and regulations, upholding

effectively and making necessary improvement in compliance sys-

which serve as the basic principles for fulfilling our corporate

Financial Instruments and Exchange Act, close attention to regula-

high ethical standards, and acting fairly and sincerely. SMBC,

tems within SMBC and its consolidated subsidiaries, the Board of

social responsibility (CSR). Accordingly, we regard strengthening

tions and actions taken is even more important than in the past for

therefore, positions maintaining high standards of compliance as

Directors prepares a specific plan for compliance-related activities

our compliance systems as one of our top management priorities.

ensuring compliance. As a consequence, careful monitoring is

one of its most important management priorities.

each fiscal year, including review and necessary revisions of regu-

Group Management from
a Compliance Perspective
As a financial holding company, SMFG seeks to maintain and

needed for the early identification of signs of emerging problems

and for taking corrective action.

Accordingly, SMFG has prescribed methods for monitoring

activities of Group companies in its Compliance Manuals for

Management of the Compliance System
SMBC adopts a basic, two-tiered structure to ensure compliance.

lations and training. In fiscal 2008, activities in progress include

implementing measures for upgrading and increasing the effec-

tiveness of various monitoring activities, strengthening the

First, each department and office is held individually responsible

functions of compliance officers, continuing the various measures

enhance systems for providing appropriate direction, guidance,

Group Companies as well as procedures for supervising and

for making before the fact decisions that ensure its conduct com-

related to revisions in the Financial Instruments and Exchange Act,

and monitoring for the compliance and related systems of Group

auditing the implementation of these activities. By taking these

plies with laws and regulations. Second, an independent, Internal

changes in the regulations for the sale of insurance products

companies to ensure the sound and proper conduct of business

measures SMFG is working to strengthen its compliance systems

Auditing Unit conducts rigorous audits of department and branch

through bank branches, and strengthening systems, education,

activities throughout the entire Group.

through improvements in monitoring activities.

compliance.

Specific activities include holding regular meetings that are

attended by representatives of Group companies, as well as meet-

ings with individual companies, with the objective of overseeing

Corporate Auditors

Audit Dept.

Group Business
Management Dept.

Audit

Report

Sumitomo Mitsui Financial Group, Inc.

Board of Directors
Group Management Committee

Directions

Report

Discuss

Compliance Committees

General Affairs Dept.

Audit/
Monitoring
Group Company

Audit/
Monitoring

Compliance System
Oversight and Guidelines

Report

Departments and Offices
General Manager responsible for compliance
Compliance Officers to assist General Managers

Management

Report

Group Companies
SMBC, Sumitomo Mitsui Card, SMBC Leasing, JRI, and SMBC Friend Securities

To maintain this two-tiered structure and ensure it is operating

and training, as well as the monitoring of compliance.
Appointment of Compliance Officers

effectively, the Compliance Unit, which includes the General Affairs

In addition to the compliance officers appointed within the bank’s

Department and the Legal Department, plans and implements

departments and branches, we have appointed Area Compliance

systems and system improvements to secure compliance, acting

Officers, who are independent from frontline departments, within

under directions from management. The Compliance Unit also pro-

certain of our business units is including the Middle Market Bank-

vides guidance and conducts monitoring activities regarding the

ing Unit and the Consumer Banking Unit. These officers are

activities of all departments and branches, and assists depart-

responsible for directing and overseeing compliance regarding

ments and branches make compliance decisions.

transactions carried out by the staff of our branches and other

The framework of SMBC’s compliance system is shown in the

diagram at the bottom of this page. To ensure that this framework

frontline offices.
Formation of the Compliance Committee

functions effectively, SMBC also engages in the activities

To ensure that compliance issues related to various operations

described in the following paragraphs.

within the bank are reviewed and discussed comprehensively, we

have formed the Compliance Committee, which has members

drawn from across the organization. This committee is chaired by

the director responsible for compliance issues and includes the

heads of relevant departments. To enhance the fairness and

objectivity of the committee’s deliberations, outside members also

participate in the Compliance Committee meetings.

■ Overview of SMBC’s Compliance System

Board of Directors, Management Committee

Audit

Corporate Auditors

Directions

Report

Compliance Unit

Directions, Monitoring, and
Legal Support

Discuss

Compliance Committees
Consult

General Affairs Dept. (overall control), Legal Dept.

Head Office departments

Discuss

General
Manager

Area Compliance Officers

Report and Discuss

Front-line Offices
(Corporate Business Offices, Branches)
General Managers
Compliance Office

Internal Audit Dept.

SMFG 2008

SMFG 2008 57

Compliance Officers

Report

Audit

Environmental Preservation Initiatives

The Group recognizes environmental preservation to be one of its most important man-

agement issues. Based on our Group Environmental Policy, we are implementing

initiatives to preserve and achieve harmony with the natural environment in our corpo-

rate activities. SMFG is a signatory to the “Statement by Financial Institutions on the

Environment and Sustainable Development” of the United Nations Environment Pro-

gramme (UNEP) and participates in the national movement “Team Minus 6%,” which is sponsored by the Japanese government.

The Group Environmental Policy

Recognizing the importance of realizing a sustainable society, SMFG is making continuous efforts to harmonize environmental preserva-
tion and corporate activities, in order to support the economy and contribute to the general well-being of society as a whole.

● We provide environment-friendly financial products, information, and solutions that help our customers in their efforts to preserve the

eco-system.

● We devise ways to reduce levels of environmental risk posed by our own activities and those of society at large.
● We are determined to fulfill our social responsibilities through the conservation of resources, energy saving, and the reduction of waste.
● We enforce a policy of strict adherence to environment-related laws and regulations.
● We practice a high level of disclosure of information relating to the Group’s environmental activities, and make ceaseless efforts to

improve our contribution to environmental preservation, incorporating the views of our staff and concerned persons from outside the Group.
● We place a high priority on thoroughly educating our staff in our environmental principles, and in ensuring that they conform to these

principles in the performance of their work.

● We actively and effectively conduct environmentally aware management, and make continuous efforts to improve our system for tackling

environmental issues, including by setting targets for each business term and reviewing them when deemed advisable.

● These policies are published on the Group’s website, and are also available in printed form upon request.

June 29, 2005

Teisuke Kitayama
President
Sumitomo Mitsui Financial Group, Inc.

Three Pillars of Group’s Activities
The three pillars of our environmental action plan are to “reduce environmental impact,” “manage environmental risk,” and “promote environ-

mental businesses.” The Group CSR Committee systematically sets environmental objectives for various activities and follows the PDCA

(plan, do, check, and act) cycle in these environmental activities. SMFG and principal Group companies have obtained ISO 14001 certifica-

tion, the international standard for environmental management systems.

Group CSR Committee Environmental Action Plan and the PDCA Cycle

● Major Initiatives by Group Companies

Objectives and Initiatives

SMBC

Sumitomo
Mitsui
Card

SMBC
Finance and
Leasing

Reduce environmental
impact

Reducing energy consumption

Promoting green procurement

Providing training on environmental issues

Manage environmental Dealing with environmental risk in lending activities
risk

Promoting sale of items for reuse

Promote
environmental
businesses

Providing funding and lease financing for environment-friendly businesses, etc.

Promoting carbon credits business

Providing environmental policy consulting

Promoting environment-conserving businesses, such as energy
service companies (ESCOs) and energy service providers (ESPs)

Providing information, suggestions for policies and measures

◯

◯
—

◯

◯
—

—

◯

◯
—

—

◯

◯
—

◯

—

JRI

◯

◯
—

—

◯

SMBC
Friend
Securities

◯

◯
—

—

Reducing Environmental Impact
SMFG sets objectives each year for the reduction in use of electric

Analysis Department (EAD) has established its own internal proce-

dures for social and environmental risk assessment in accordance

power and other sources of energy and is actively engaged in

with the Equator Principles, and EAD keeps updating its risk

reaching these energy conservation goals. We conduct “Is conser-

assessment operation.

vation visible?” campaigns to lower energy use along with

autonomous energy use reduction efforts. In addition, SMBC has

made its Head Office “carbon neutral” through the procurement of

“green” sources of energy and purchases of carbon credits.*

Moreover, Sumitomo Mitsui Card has attained carbon neutral sta-

tus for its Osaka Head Office, and SMFG Finance and Leasing has

reached this status for its Tokyo Head Office, both through the pur-

chase of carbon credits.
* Carbon credits are also referred to as “Kyoto credits,” “emission allowances,” and “Certified

Emission Reductions (CER)”. In this annual report, we use “carbon credits” to refer to these and

the other concepts recognized under the Kyoto Protocol.

Managing Environmental Risk
● Dealing with Soil Contamination and Asbestos Risk
To deal with the risk that land pledged as collateral by borrowers

may be contaminated, SMBC requires contamination risk assess-

Promoting Environmental Businesses
The Group considers providing assistance to companies engaged

ment for land meeting certain criteria. When the risk is judged to

in environmental business as an effective way to provide assis-

be high, the assessed value of the potential risk is subtracted from

tance to society and the international community through its

the value of the collateral.

business activities.

In addition, similar measures are taken regarding asbestos

SMBC, in particular, formed the Eco-Biz Promotion Council in

risk. When there is a concern about possible asbestos pollution,

fiscal 2005 to discuss periodically the development of sophisti-

risk assessments are conducted for asset collateral meeting cer-

cated and efficient products and services that contribute to

tain criteria, and SMBC encourages its customers to implement

environmental maintenance and improvement.

assessment surveys of such risk. Regarding its own premises,

SMBC conducts surveys of asbestos risk and takes appropriate

removal measures.

● Adoption of the “Equator Principles”
SMBC has adopted the Equator Principles which are a set of

guidelines for financial institutions to conduct assessment and

management of social and environmental impacts related to
financing of large-scale development projects. The Environment

Financial intermediary functions

Information-dissemination functions

● Nurturing, supporting, and creating

● Publishing SAFE, an environmental

environmental businesses

information magazine

● Supporting carbon credits business,

etc.

● Holding of environmental seminars
● Making suggestions for policies, etc.

SMFG 2008

SMFG 2008 59

Environmental Preservation Initiatives

The Group recognizes environmental preservation to be one of its most important man-

agement issues. Based on our Group Environmental Policy, we are implementing

initiatives to preserve and achieve harmony with the natural environment in our corpo-

rate activities. SMFG is a signatory to the “Statement by Financial Institutions on the

Environment and Sustainable Development” of the United Nations Environment Pro-

gramme (UNEP) and participates in the national movement “Team Minus 6%,” which is sponsored by the Japanese government.

The Group Environmental Policy

● We provide environment-friendly financial products, information, and solutions that help our customers in their efforts to preserve the

eco-system.

principles in the performance of their work.

● We actively and effectively conduct environmentally aware management, and make continuous efforts to improve our system for tackling

environmental issues, including by setting targets for each business term and reviewing them when deemed advisable.

● These policies are published on the Group’s website, and are also available in printed form upon request.

June 29, 2005

Teisuke Kitayama
President
Sumitomo Mitsui Financial Group, Inc.

Three Pillars of Group’s Activities
The three pillars of our environmental action plan are to “reduce environmental impact,” “manage environmental risk,” and “promote environ-

mental businesses.” The Group CSR Committee systematically sets environmental objectives for various activities and follows the PDCA

(plan, do, check, and act) cycle in these environmental activities. SMFG and principal Group companies have obtained ISO 14001 certifica-

tion, the international standard for environmental management systems.

Group CSR Committee Environmental Action Plan and the PDCA Cycle

● Major Initiatives by Group Companies

Objectives and Initiatives

SMBC

Sumitomo
Mitsui
Card

SMBC
Finance and
Leasing

Reduce environmental
impact

Reducing energy consumption

Promoting green procurement

Providing training on environmental issues

Manage environmental Dealing with environmental risk in lending activities
risk

Promoting sale of items for reuse

Promote
environmental
businesses

Providing funding and lease financing for environment-friendly businesses, etc.

Promoting carbon credits business

Providing environmental policy consulting

Promoting environment-conserving businesses, such as energy
service companies (ESCOs) and energy service providers (ESPs)

Providing information, suggestions for policies and measures

◯

◯
—

◯

◯
—

—

◯

◯
—

—

◯

◯
—

◯

—

JRI

◯

◯
—

—

◯

SMBC
Friend
Securities

◯

◯
—

—

Reducing Environmental Impact
SMFG sets objectives each year for the reduction in use of electric

Analysis Department (EAD) has established its own internal proce-

dures for social and environmental risk assessment in accordance

power and other sources of energy and is actively engaged in

with the Equator Principles, and EAD keeps updating its risk

reaching these energy conservation goals. We conduct “Is conser-

assessment operation.

vation visible?” campaigns to lower energy use along with

autonomous energy use reduction efforts. In addition, SMBC has

made its Head Office “carbon neutral” through the procurement of

“green” sources of energy and purchases of carbon credits.*

Moreover, Sumitomo Mitsui Card has attained carbon neutral sta-

tus for its Osaka Head Office, and SMFG Finance and Leasing has

reached this status for its Tokyo Head Office, both through the pur-

chase of carbon credits.
* Carbon credits are also referred to as “Kyoto credits,” “emission allowances,” and “Certified

Emission Reductions (CER)”. In this annual report, we use “carbon credits” to refer to these and

the other concepts recognized under the Kyoto Protocol.

Managing Environmental Risk
● Dealing with Soil Contamination and Asbestos Risk
To deal with the risk that land pledged as collateral by borrowers

may be contaminated, SMBC requires contamination risk assess-

Promoting Environmental Businesses
The Group considers providing assistance to companies engaged

ment for land meeting certain criteria. When the risk is judged to

in environmental business as an effective way to provide assis-

be high, the assessed value of the potential risk is subtracted from

tance to society and the international community through its

the value of the collateral.

business activities.

In addition, similar measures are taken regarding asbestos

SMBC, in particular, formed the Eco-Biz Promotion Council in

risk. When there is a concern about possible asbestos pollution,

fiscal 2005 to discuss periodically the development of sophisti-

risk assessments are conducted for asset collateral meeting cer-

cated and efficient products and services that contribute to

tain criteria, and SMBC encourages its customers to implement

environmental maintenance and improvement.

assessment surveys of such risk. Regarding its own premises,

SMBC conducts surveys of asbestos risk and takes appropriate

removal measures.

● Adoption of the “Equator Principles”
SMBC has adopted the Equator Principles which are a set of

guidelines for financial institutions to conduct assessment and

management of social and environmental impacts related to
financing of large-scale development projects. The Environment

Financial intermediary functions

Information-dissemination functions

● Nurturing, supporting, and creating

● Publishing SAFE, an environmental

environmental businesses

information magazine

● Supporting carbon credits business,

etc.

● Holding of environmental seminars
● Making suggestions for policies, etc.

SMFG 2008

SMFG 2008 59

Nurturing and Supporting Environmental Businesses
● SMBC Eco-Loans
SMBC began to offer loan products with preferential interest rates

environmental technologies. Separately

from the eco japan cup contest, SMBC

works with universities in Japan to

to companies that have obtained various types of environmental

select those venture companies that

certifications in February 2007 with the aim of encouraging small

have potential to commercialize their

and medium-sized enterprises (SMEs) to engage in more environ-

technologies. SMBC gives assistance

mentally friendly activities.

Features of Eco-Loans: To enhance the convenience of these loans for SMEs,
we have expanded the list of environmental certifications beyond ISO 14001 to
include a total of more than 20 NPOs and local government entities in Japan
that have their own environmental certifications.

Outstanding balance: As of March 31, 2008, 475 Eco-Loans had been

made in the total amount of ¥30 billion.

● Global ECOBIZ Assist
Begun by SMBC in March 2008, this program offers preferential

interest rates and fees to support the trade activities and entry into

overseas markets of SMEs that manufacture and develop environ-

mental equipment activities.

Objectives of ECOBIZ Assist: This program is intended to provide assistance
in the globalization of Japanese SMEs that have superior environmental tech-
nologies and disseminate information about Japan’s environmental technology
to the rest of the world.

Eligibility: SMEs that are engaged in manufacturing and developing envi-

ronmental equipment in the fields of water, waste materials, new energy, the
atmosphere, energy conservation, and other areas (soil pollution remediation,
greening, recovery of natural areas, etc.)

● Environmental Advisory Business
In the environmental field, Group company JRI is emphasizing the

provision of outsourcing services for the operation, maintenance,

and management of environmental facilities as well as environ-

mental advisory services.

● eco japan cup
Since fiscal 2006, SMBC and Japan’s Ministry of the Environment

to them jointly with the universities and

thereby provides support for their R&D

activities.

● THE 5TH ECO-PRODUCTS INTERNATIONAL FAIR
THE 5TH ECO-PRODUCTS INTERNATIONAL FAIR is a compre-

hensive event that showcases a wide range of products and

services that are environmentally friendly. The fair planned for

March 2009 will be the fifth annual event in this series. The fair held

in March 2008 was presented in Hanoi, Vietnam, and participants

included 91 companies and organizations from nine countries,

including Japan.

The press conference held on June 10, 2008, in the Philip-

pines to announce THE 5TH ECO-PRODUCTS INTERNATIONAL

FAIR was attended by key members of the planning committee for

the fair, including Teisuke Kitayama, chairman of SMBC, Shigeo

Takenaka, Secretary-General of the Asian Productivity Organiza-

tion (APO), and the chair of the advisory committee for the fair

Amelita Ramos, wife of a former president of the Philippines.

● Environmental Business Networking Event
Beginning in 2006, responding to the need to expand distribution

channels to potential customers of companies supplying environ-

mental products and services, SMBC and SMBC Consulting jointly

Carbon Credits Related Business Activities
The Group has engaged in business activities related to carbon

bon credits SMBC purchases under the campaign will be trans-

ferred to the Japanese government for free to help the nation

credits, including introductions of available carbon credits to poten-

reach its target under the Kyoto protocol.

tial buyers since 2005.
● Small-Lot Carbon Credits Purchase Service
Beginning in June 2007, SMBC began to offer a service for pur-

● Carbon Neutral Leases
Sumitomo Mitsui Finance and Leasing has been contributing to the

chase of small-lot carbon credits (joint purchase by several

environment by offering lease financing for energy-conserving

companies is acceptable) making use of money trust scheme. Fur-

machinery and equipment in collaboration with ESCO enterprises.

ther, to enhance the buyer’s CSR activities, the buyer can choose

In August 2007, it introduced carbon neutral leases. This is a new

whether to receive or donate the deposit interest earned on the

service that renders the greenhouse gases released by leased

trust assets between the period of the start of the money trust and

assets neutral through the allocation of carbon credits to these

the settlement of carbon credit purchase.

assets. As a result of the implementation of this service, we are in a

Joint purchasing company A
Truster and beneficiary

Joint purchasing company B
Truster and beneficiary

Money trust (€)

Beneficiary rights

Money trust (€)

Beneficiary rights

SMBC
(trust)

Trustee

Buyer of
the ERPA

Emission Reductions
Purchase Agreement
(ERPA)

Overseas
corporations, etc.

Developer of the emission
reductions project

Seller of the ERPA

Environmental preservation
organizations

Donations

Ministry of the Environment,
Ministry of Economy, Trade and Industry
(Account for custody of carbon credits)

The CDM* Executive Board
(Account for custody of carbon credits)

* Clean Development Mechanism

● Carbon Offsetting through Housing Loans
Beginning in April 2008, SMBC began a campaign to provide sup-

port for carbon offsetting to prevent global warming through

housing loans made to individual customers. Under this program,

home buyers purchase environmentally friendly houses with loans

provided by SMBC, and, for customers who agree to take steps to

reduce greenhouse gases, SMBC purchases carbon credits

equivalent to one ton of greenhouse gases per household. These

credits are then trans-

ferred to the Japanese

government, thus

making possible car-

bon offsetting through

the joint efforts of cus-

tomers and the bank.

much better position to support the activities of companies that

want to take the initiative in conducting environmentally friendly

business activities.

Contribution to
the environment

GHG emission
reduction

CSR report

Information Provision and Dissemination
● Publication of Environmental Magazine SAFE
SMFG has published this magazine on

a bimonthly basis to provide information

on the environment to its customers and

other parties since 1996. Content

includes interviews with the top man-

agement of companies that conduct

sophisticated environmental activities

and information on environmental regu-

latory trends. In addition, a related

“Environmental Seminar” is held each

year to provide additional information on

the environment.
http://www.smfg.co.jp/responsibility/csrinfo/safe.html

● Signatory to the Carbon Disclosure Project (CDP)
SMFG is a signatory to the Carbon Disclosure Project (CDP).

● “Fight Global Warming” Campaign for Marketing Japanese

Today, institutional investors and financial institutions with an inter-

have jointly sponsored the “eco japan cup,” which is a contest for

have held Environmental Business Networking Events. About 500

Government Bonds for Individual Investors

est in climate change around the globe are requiring information

selecting the best environment business plans and ideas. This

companies have

contest has the aim of promoting the development of a recycling-

oriented economy and society that are symbiotic with the natural

environment.

attended, and about 600

business discussions

have been held at these

One of the ideas behind this contest is to nurture venture com-

events.

panies in the environmental field and support the development of

Starting in June 2008, SMBC has conducted its “Fight Global

disclosure related to the stance of companies and others as well

Warming” campaign for marketing Japanese government bonds

as their initiatives related to environmental issues. The CDP aims to

(JGB) for individual investors. Under this campaign, which is

gather this information and make the results available.

designed to contribute to greenhouse gas (GHG) emission reduc-

tion as part of its efforts to fight global warming, for every

individual investor who purchases Japanese government bonds

worth one million yen or more, SMBC will buy carbon credits worth
500 kilograms of carbon dioxide (CO2). Two thousand tons of car-

SMFG 2008

SMFG 2008 61

Nurturing and Supporting Environmental Businesses
● SMBC Eco-Loans
SMBC began to offer loan products with preferential interest rates

environmental technologies. Separately

from the eco japan cup contest, SMBC

works with universities in Japan to

to companies that have obtained various types of environmental

select those venture companies that

certifications in February 2007 with the aim of encouraging small

have potential to commercialize their

and medium-sized enterprises (SMEs) to engage in more environ-

technologies. SMBC gives assistance

mentally friendly activities.

Outstanding balance: As of March 31, 2008, 475 Eco-Loans had been

made in the total amount of ¥30 billion.

● Global ECOBIZ Assist
Begun by SMBC in March 2008, this program offers preferential

interest rates and fees to support the trade activities and entry into

overseas markets of SMEs that manufacture and develop environ-

mental equipment activities.

Eligibility: SMEs that are engaged in manufacturing and developing envi-

ronmental equipment in the fields of water, waste materials, new energy, the
atmosphere, energy conservation, and other areas (soil pollution remediation,
greening, recovery of natural areas, etc.)

● Environmental Advisory Business
In the environmental field, Group company JRI is emphasizing the

provision of outsourcing services for the operation, maintenance,

and management of environmental facilities as well as environ-

mental advisory services.

● eco japan cup
Since fiscal 2006, SMBC and Japan’s Ministry of the Environment

to them jointly with the universities and

thereby provides support for their R&D

activities.

● THE 5TH ECO-PRODUCTS INTERNATIONAL FAIR
THE 5TH ECO-PRODUCTS INTERNATIONAL FAIR is a compre-

hensive event that showcases a wide range of products and

services that are environmentally friendly. The fair planned for

March 2009 will be the fifth annual event in this series. The fair held

in March 2008 was presented in Hanoi, Vietnam, and participants

included 91 companies and organizations from nine countries,

including Japan.

The press conference held on June 10, 2008, in the Philip-

pines to announce THE 5TH ECO-PRODUCTS INTERNATIONAL

FAIR was attended by key members of the planning committee for

the fair, including Teisuke Kitayama, chairman of SMBC, Shigeo

Takenaka, Secretary-General of the Asian Productivity Organiza-

tion (APO), and the chair of the advisory committee for the fair

Amelita Ramos, wife of a former president of the Philippines.

● Environmental Business Networking Event
Beginning in 2006, responding to the need to expand distribution

channels to potential customers of companies supplying environ-

mental products and services, SMBC and SMBC Consulting jointly

Carbon Credits Related Business Activities
The Group has engaged in business activities related to carbon

bon credits SMBC purchases under the campaign will be trans-

ferred to the Japanese government for free to help the nation

credits, including introductions of available carbon credits to poten-

reach its target under the Kyoto protocol.

tial buyers since 2005.
● Small-Lot Carbon Credits Purchase Service
Beginning in June 2007, SMBC began to offer a service for pur-

● Carbon Neutral Leases
Sumitomo Mitsui Finance and Leasing has been contributing to the

chase of small-lot carbon credits (joint purchase by several

environment by offering lease financing for energy-conserving

companies is acceptable) making use of money trust scheme. Fur-

machinery and equipment in collaboration with ESCO enterprises.

ther, to enhance the buyer’s CSR activities, the buyer can choose

In August 2007, it introduced carbon neutral leases. This is a new

whether to receive or donate the deposit interest earned on the

service that renders the greenhouse gases released by leased

trust assets between the period of the start of the money trust and

assets neutral through the allocation of carbon credits to these

the settlement of carbon credit purchase.

assets. As a result of the implementation of this service, we are in a

Joint purchasing company A
Truster and beneficiary

Joint purchasing company B
Truster and beneficiary

Money trust (€)

Beneficiary rights

Money trust (€)

Beneficiary rights

SMBC
(trust)

Trustee

Buyer of
the ERPA

Emission Reductions
Purchase Agreement
(ERPA)

Overseas
corporations, etc.

Developer of the emission
reductions project

Seller of the ERPA

Environmental preservation
organizations

Donations

Ministry of the Environment,
Ministry of Economy, Trade and Industry
(Account for custody of carbon credits)

The CDM* Executive Board
(Account for custody of carbon credits)

* Clean Development Mechanism

● Carbon Offsetting through Housing Loans
Beginning in April 2008, SMBC began a campaign to provide sup-

port for carbon offsetting to prevent global warming through

housing loans made to individual customers. Under this program,

home buyers purchase environmentally friendly houses with loans

provided by SMBC, and, for customers who agree to take steps to

reduce greenhouse gases, SMBC purchases carbon credits

equivalent to one ton of greenhouse gases per household. These

credits are then trans-

ferred to the Japanese

government, thus

making possible car-

bon offsetting through

the joint efforts of cus-

tomers and the bank.

much better position to support the activities of companies that

want to take the initiative in conducting environmentally friendly

business activities.

Contribution to
the environment

GHG emission
reduction

CSR report

Information Provision and Dissemination
● Publication of Environmental Magazine SAFE
SMFG has published this magazine on

a bimonthly basis to provide information

on the environment to its customers and

other parties since 1996. Content

includes interviews with the top man-

agement of companies that conduct

sophisticated environmental activities

and information on environmental regu-

latory trends. In addition, a related

“Environmental Seminar” is held each

year to provide additional information on

the environment.
http://www.smfg.co.jp/responsibility/csrinfo/safe.html

● Signatory to the Carbon Disclosure Project (CDP)
SMFG is a signatory to the Carbon Disclosure Project (CDP).

● “Fight Global Warming” Campaign for Marketing Japanese

Today, institutional investors and financial institutions with an inter-

have jointly sponsored the “eco japan cup,” which is a contest for

have held Environmental Business Networking Events. About 500

Government Bonds for Individual Investors

est in climate change around the globe are requiring information

selecting the best environment business plans and ideas. This

companies have

contest has the aim of promoting the development of a recycling-

oriented economy and society that are symbiotic with the natural

environment.

attended, and about 600

business discussions

have been held at these

One of the ideas behind this contest is to nurture venture com-

events.

panies in the environmental field and support the development of

Starting in June 2008, SMBC has conducted its “Fight Global

disclosure related to the stance of companies and others as well

Warming” campaign for marketing Japanese government bonds

as their initiatives related to environmental issues. The CDP aims to

(JGB) for individual investors. Under this campaign, which is

gather this information and make the results available.

designed to contribute to greenhouse gas (GHG) emission reduc-

tion as part of its efforts to fight global warming, for every

individual investor who purchases Japanese government bonds

worth one million yen or more, SMBC will buy carbon credits worth
500 kilograms of carbon dioxide (CO2). Two thousand tons of car-

SMFG 2008

SMFG 2008 61

Social Contribution Activities

Fundamental approach to social contribution activities

SMFG and its Group companies, due to the public service nature of the financial services industry, recognize the importance of using

business operations to contribute to the development of society. In addition to this contribution to society through day-to-day business

operations, we must also act as a responsible corporate citizen by engaging in activities that help lay the foundations for a better soci-

ety in the future. In the spirit of corporate citizenship, SMFG and its Group companies will fulfill their social obligations through a broad

range of activities.

Policy on social contribution activities

SMFG and its Group companies understand their role as responsible corporate citizens, and undertake activities that contribute to the

realization of a prosperous and sustainable society. We maintain an extensive social contribution program by planning and executing

social contribution activities at the corporate level, as well as encouraging employees to volunteer for worthwhile activities.

The central elements of our social contribution activities

SMFG and its Group companies position the following four sectors as the core fields for social contributions:

1) social welfare; 2) local and international communities; 3) environment; and 4) culture, art and education.

Activities Contributing to Social Welfare
Group companies undertake a wide range of social welfare activi-

● Providing Opportunities to Experience Volunteer Activities
SMBC provides opportunities for its staff and their families to expe-

ties that contribute to creating a more-affluent society.

rience volunteer activities. During fiscal 2007, SMBC held a

● Collection and Donation of Voided Postcards, Unused Prepaid

Offering Support to Physically Challenged Persons through

Telephone Cards, and Used Postage Stamps

Demonstrations of Service Dogs Assisting Persons with Sight,

SMFG collects voided postcards from Group employees,

Hearing, and Other Disabilities,” “International Cooperation Semi-

exchanges them for new postal stamps, and donates the stamps

nar for Learning about the Life of Children in Developing Countries

to volunteer organizations to help them cover their postal costs. In

and Sorting Foreign Coins Received at the Bank Branches and

addition to these SMFG activities, SMBC collects unused prepaid

Other Offices,” and “Seminar on First-Aid Methods, Including the

number of these events, including three entitled: “Learning about

Contribution Activities for Local and Overseas Communities
We undertake a variety of activities that contribute to the develop-

ment of local communities in Japan, and international communities

overseas.

● SMBC Volunteer Fund
The SMBC Volunteer Fund makes contributions to volunteer orga-

nizations, including those described below. Funds are raised from

SMBC employees who volunteer to have ¥100 deducted from their

In addition, the fund also made contributions for emergency disaster relief,

including the following:

* Donations were made in fiscal 2007 to provide relief after the following

disasters: The Noto Peninsula earthquake in Japan, the earthquake

and tsunami in the Solomon Islands, the Niigata-Chuetsu offshore

earthquake, floods in Kumamoto Prefecture in Japan, a major earth-

quake in Peru, forest fires in Southern California, and a cyclone in

Bangladesh.

* Donations were provided in May 2008 to offer assistance for damage

following the cyclone in Myanmar, and the major earthquake in China’s

salaries each month. As of June 2008, about 10,000 employees

Sichuan Province. Also, in June 2008, assistance was provided follow-

were participating in the program.

Major Donations by the Fund in Fiscal 2007:

* Donations to economically disadvantaged

areas of Cambodia to repair and expand

older school facilities and to build a work

training facility for female students

* Payment of costs for publishing picture

books and hosting training seminars on

reading for teachers in Cambodia

* Donations for setting up school libraries in

Laos and operating culture centers there

for art education

ing the Iwate-Miyagi inland earthquake.

● Opening of accounts for donations to disaster victims
When major natural disasters occur, either in Japan or overseas,

SMBC will open special accounts to collect donations for relief and
allows anyone wishing to make donations to the account without

fund transfer charges. SMBC also solicits donations for such

causes from its employees and those of Group company Japan

Research Institute (JRI). During fiscal 2007, donations were made

from these special accounts to offer relief following the Noto Penin-

sula earthquake in Japan, the earthquake and tsunami in the

Solomon Islands, the Niigata-Chuetsu offshore earthquake, floods

* Scholarships for primary school students in Laos and for members of

in Kumamoto Prefecture in Japan, the major earthquake in Peru,

minority groups in that country to attend teacher training schools as

and the cyclone in Bangladesh. Donations were also made avail-

well as funding for a health care and hygiene project in Laos

* Scholarships for girls in rural areas of China

* Payments for medical treatment of persons in Afghanistan

who have been injured as a result of conflicts or by land mines

* Donations for the distribution of textbooks to health and educational

facilities as well as the provision of technical guidance in Nepal as part

of projects related to the improvement in nutritional conditions and edu-

able in May 2008 to provide assistance for damage following the

cyclone in Myanmar, and the major earthquake in China’s Sichuan

Province, and, in June 2008, for assistance following the Iwate-

Miyagi inland earthquake.

● Activities of YUI, SMBC’s Volunteer Organization
SMBC also provides active support for YUI, an in-house volunteer

telephone cards, Sumitomo Mitsui Card collects used postage

Use of Arm Slings and Automated External Defibrillators (AEDs), to

cation in that country

stamps and prepaid cards from employees, and both Group com-

Assist Persons Injured as a Result of Disasters or Suffering from

panies donate them to volunteer organizations. Similarly, SMBC

Emergency Medical Problems.” In addition, SMBC provides

Friend Securities also collects used postage stamps for donation

employees with information on various volunteer activities and

to volunteer groups.

encourages their participation in such events.

● Sign-Language Courses
To assist employees in communicating with and providing high

level services to aurally challenged customers, SMBC has offered

sign-language courses to its employees each year since 1997.

This is one of the many ways that SMBC makes social contribu-

tions through its business activities. In fiscal 2007, about 80 SMBC

employees enrolled in the course, which was conducted in 10 ses-

sions. Also, in 2005, the bank began to hold annual lectures to

provide opportunities for aurally challenged guest speakers,

assisted by interpreters, to

● Donations to Organizations Assisting Senior Citizens
SMBC Friend Securities has launched an investment trust that

share their impressions of

invests in companies that respond to the needs of Japan’s senior

daily life using sign language.

citizens, and, in March 2008, donated a portion of the income from

This event was held for the

the marketing of this trust to organizations that help seniors to lead

fourth consecutive year in

healthy and fulfilling lives.

April 2008 and was attended

by about 1,200 employees.

* Assistance to a project in Myanmar for improving the living environ-

organization that provides the opportunity for SMBC employees to

ment for women through training in health and hygiene, activities to

increase the literacy rate, teaching sewing skills, and other areas

* Donations to programs in Bangladesh to assist extremely economically

disadvantaged women in raising their incomes

* Support for a water hygiene improvement project at primary schools in

Sudan in Africa

* Donations to a primary school lunch project in Burkina Faso in Africa

* Assistance for surgical expenses and scholarships for primary, middle,

plan and carry out welfare activities. YUI activities conducted on a

continuing basis include social events held for persons living in

homes for the speech-challenged, holding of charity bazaars for

selling items collected from employees, and events to provide

opportunities for senior citizens to sing their favorite songs. In fis-

cal 2007, other activities included sending picture books collected

by YUI volunteers to children in Laos, with translations of the cap-

and high school students in Indonesia as well as funding for a project

tions and explanations pasted into the books, and holding of

to assist newborn babies

charity bazaars for the sale of handicraft goods.

* Support for trips and other activities for families who have young

children with terminal illnesses and want to enrich their memories of

their children during their remaining time together

* Donations to an international exchange program for children between

the ages of 12 and 13

* Sponsorship of a workshop at a primary school for a puppet play

company composed of speech- and aurally-challenged persons

* Sharing a portion of the expenses related to the establishment of

Japan’s first school for training in Japanese sign language

SMFG 2008

SMFG 2008 63

Social Contribution Activities

Fundamental approach to social contribution activities

SMFG and its Group companies, due to the public service nature of the financial services industry, recognize the importance of using

business operations to contribute to the development of society. In addition to this contribution to society through day-to-day business

operations, we must also act as a responsible corporate citizen by engaging in activities that help lay the foundations for a better soci-

ety in the future. In the spirit of corporate citizenship, SMFG and its Group companies will fulfill their social obligations through a broad

range of activities.

Policy on social contribution activities

SMFG and its Group companies understand their role as responsible corporate citizens, and undertake activities that contribute to the

realization of a prosperous and sustainable society. We maintain an extensive social contribution program by planning and executing

social contribution activities at the corporate level, as well as encouraging employees to volunteer for worthwhile activities.

The central elements of our social contribution activities

SMFG and its Group companies position the following four sectors as the core fields for social contributions:

1) social welfare; 2) local and international communities; 3) environment; and 4) culture, art and education.

Activities Contributing to Social Welfare
Group companies undertake a wide range of social welfare activi-

● Providing Opportunities to Experience Volunteer Activities
SMBC provides opportunities for its staff and their families to expe-

ties that contribute to creating a more-affluent society.

rience volunteer activities. During fiscal 2007, SMBC held a

● Collection and Donation of Voided Postcards, Unused Prepaid

Offering Support to Physically Challenged Persons through

Telephone Cards, and Used Postage Stamps

Demonstrations of Service Dogs Assisting Persons with Sight,

SMFG collects voided postcards from Group employees,

Hearing, and Other Disabilities,” “International Cooperation Semi-

exchanges them for new postal stamps, and donates the stamps

nar for Learning about the Life of Children in Developing Countries

to volunteer organizations to help them cover their postal costs. In

and Sorting Foreign Coins Received at the Bank Branches and

addition to these SMFG activities, SMBC collects unused prepaid

Other Offices,” and “Seminar on First-Aid Methods, Including the

number of these events, including three entitled: “Learning about

Contribution Activities for Local and Overseas Communities
We undertake a variety of activities that contribute to the develop-

ment of local communities in Japan, and international communities

overseas.

● SMBC Volunteer Fund
The SMBC Volunteer Fund makes contributions to volunteer orga-

nizations, including those described below. Funds are raised from

SMBC employees who volunteer to have ¥100 deducted from their

In addition, the fund also made contributions for emergency disaster relief,

including the following:

* Donations were made in fiscal 2007 to provide relief after the following

disasters: The Noto Peninsula earthquake in Japan, the earthquake

and tsunami in the Solomon Islands, the Niigata-Chuetsu offshore

earthquake, floods in Kumamoto Prefecture in Japan, a major earth-

quake in Peru, forest fires in Southern California, and a cyclone in

Bangladesh.

* Donations were provided in May 2008 to offer assistance for damage

following the cyclone in Myanmar, and the major earthquake in China’s

salaries each month. As of June 2008, about 10,000 employees

Sichuan Province. Also, in June 2008, assistance was provided follow-

were participating in the program.

Major Donations by the Fund in Fiscal 2007:

* Donations to economically disadvantaged

areas of Cambodia to repair and expand

older school facilities and to build a work

training facility for female students

* Payment of costs for publishing picture

books and hosting training seminars on

reading for teachers in Cambodia

* Donations for setting up school libraries in

Laos and operating culture centers there

for art education

ing the Iwate-Miyagi inland earthquake.

● Opening of accounts for donations to disaster victims
When major natural disasters occur, either in Japan or overseas,

SMBC will open special accounts to collect donations for relief and
allows anyone wishing to make donations to the account without

fund transfer charges. SMBC also solicits donations for such

causes from its employees and those of Group company Japan

Research Institute (JRI). During fiscal 2007, donations were made

from these special accounts to offer relief following the Noto Penin-

sula earthquake in Japan, the earthquake and tsunami in the

Solomon Islands, the Niigata-Chuetsu offshore earthquake, floods

* Scholarships for primary school students in Laos and for members of

in Kumamoto Prefecture in Japan, the major earthquake in Peru,

minority groups in that country to attend teacher training schools as

and the cyclone in Bangladesh. Donations were also made avail-

well as funding for a health care and hygiene project in Laos

* Scholarships for girls in rural areas of China

* Payments for medical treatment of persons in Afghanistan

who have been injured as a result of conflicts or by land mines

* Donations for the distribution of textbooks to health and educational

facilities as well as the provision of technical guidance in Nepal as part

of projects related to the improvement in nutritional conditions and edu-

able in May 2008 to provide assistance for damage following the

cyclone in Myanmar, and the major earthquake in China’s Sichuan

Province, and, in June 2008, for assistance following the Iwate-

Miyagi inland earthquake.

● Activities of YUI, SMBC’s Volunteer Organization
SMBC also provides active support for YUI, an in-house volunteer

telephone cards, Sumitomo Mitsui Card collects used postage

Use of Arm Slings and Automated External Defibrillators (AEDs), to

cation in that country

stamps and prepaid cards from employees, and both Group com-

Assist Persons Injured as a Result of Disasters or Suffering from

panies donate them to volunteer organizations. Similarly, SMBC

Emergency Medical Problems.” In addition, SMBC provides

Friend Securities also collects used postage stamps for donation

employees with information on various volunteer activities and

to volunteer groups.

encourages their participation in such events.

● Sign-Language Courses
To assist employees in communicating with and providing high

level services to aurally challenged customers, SMBC has offered

sign-language courses to its employees each year since 1997.

This is one of the many ways that SMBC makes social contribu-

tions through its business activities. In fiscal 2007, about 80 SMBC

employees enrolled in the course, which was conducted in 10 ses-

sions. Also, in 2005, the bank began to hold annual lectures to

provide opportunities for aurally challenged guest speakers,

assisted by interpreters, to

● Donations to Organizations Assisting Senior Citizens
SMBC Friend Securities has launched an investment trust that

share their impressions of

invests in companies that respond to the needs of Japan’s senior

daily life using sign language.

citizens, and, in March 2008, donated a portion of the income from

This event was held for the

the marketing of this trust to organizations that help seniors to lead

fourth consecutive year in

healthy and fulfilling lives.

April 2008 and was attended

by about 1,200 employees.

* Assistance to a project in Myanmar for improving the living environ-

organization that provides the opportunity for SMBC employees to

ment for women through training in health and hygiene, activities to

increase the literacy rate, teaching sewing skills, and other areas

* Donations to programs in Bangladesh to assist extremely economically

disadvantaged women in raising their incomes

* Support for a water hygiene improvement project at primary schools in

Sudan in Africa

* Donations to a primary school lunch project in Burkina Faso in Africa

* Assistance for surgical expenses and scholarships for primary, middle,

plan and carry out welfare activities. YUI activities conducted on a

continuing basis include social events held for persons living in

homes for the speech-challenged, holding of charity bazaars for

selling items collected from employees, and events to provide

opportunities for senior citizens to sing their favorite songs. In fis-

cal 2007, other activities included sending picture books collected

by YUI volunteers to children in Laos, with translations of the cap-

and high school students in Indonesia as well as funding for a project

tions and explanations pasted into the books, and holding of

to assist newborn babies

charity bazaars for the sale of handicraft goods.

* Support for trips and other activities for families who have young

children with terminal illnesses and want to enrich their memories of

their children during their remaining time together

* Donations to an international exchange program for children between

the ages of 12 and 13

* Sponsorship of a workshop at a primary school for a puppet play

company composed of speech- and aurally-challenged persons

* Sharing a portion of the expenses related to the establishment of

Japan’s first school for training in Japanese sign language

SMFG 2008

SMFG 2008 63

● SMBC Program for Contributing to Local Communities

Beginning in fiscal 2007, SMBC

● Establishment of Scholarships and Lecture Sponsorships for Chinese Universities
Beginning in fiscal 2008, SMBC has established a scholarship pro-

has begun to promote activities

gram for several universities in China, including Soochow

that are planned by its branches

University and Shanghai International Studies University. Along

and other offices in Japan to con-

with this program, SMBC has also begun to provide endowed

tribute to local communities. Thus

courses in Chinese universities.

far, these activities have included

cleanup activities for areas in the

vicinity of SMBC branches and

● SMBC GLOBAL FOUNDATION
One of the principal activities of the SMBC Global Foundation is

the outdoors, the planting of trees

providing scholarships to university students in Asian countries,

and flowers around branches,

and, since 1994, it has offered educational support to more than

● Neighborhood Cleanup Programs

● Children’s Illustration Contest

* SMFG sets aside

one day a year as

“SMFG Cleanup

Day,” and its

employees partici-

pate in cleanup

events in the

Kugenuma and Suma coastal areas. During fiscal 2007, 117 employees of

Group companies participated in these events.

* At SMBC, interested employees have helped to clean up riverside areas

since April 2004, and, in April 2008, about 260 participants cleaned up the

Since fiscal 2007, SMBC has

sponsored an illustration contest

for primarily schoolchildren on the

theme “The Kind of Work I Would

Like to Do.” About 3,000 illustra-

tions were submitted for the first

year’s contest. We prepared an original bank passbook featuring

the works of winners in the contest. In addition, the winning works

were placed on display in SMBC’s branches nationwide.

sign-language study classes, and

5,000 students in five countries. In 2006, the foundation added

Koshien Beach area in Hyogo Prefecture.

● Financial and Economic Education

around the world in the lobbies of SMBC branches.

The foundation is also active in the United States and Canada,

exhibitions of children’s art from

Malaysia and Vietnam to the list of countries receiving its support.

● Support for UNICEF

where it mainly provides support for educational and cultural activ-

ities. The foundation’s programs are an important part of SMBC’s

* SMBC is a member corporation of the steering committee of UNICEF Coin

activities for contributing to international society.

Aid and cooperates in the organization’s fund-raising activities. To this end,

SMBC places coin collection boxes in its branches and offices in Japan

and calls for donations from the general public. The coins collected are

sorted by currency with the cooperation of SMBC Green Service Co., Ltd.,

a Group company, before being delivered to the Japan Committee for

UNICEF. In fiscal 2007, about 510,000 foreign coins (approximately 2.3

tons) and 40,000 foreign currency bills were collected at SMBC branches,

airports in Japan, and other locations. Donations collected also included

about ¥6 million in Japanese coins and bills. Since these activities began in

● SMBC Foundation for International Cooperation
Established in 1990, the SMBC Foundation aims to assist in nurtur-

ing the human resources necessary to achieve sustainable growth

in developing economies as well as promote international

exchange activities. Through fiscal 2007, the foundation has pro-

vided financial support for 44 students from Asian countries to

enable them to attend universities in Japan. The foundation also

1992, the total amount of donations has run up to ¥780 million.

offers subsidies to research institutes and researchers undertaking

SMBC also cooperates with the Japan Committee for UNICEF by

projects related to developing countries.

Environmental Activities
We also sponsor activities that contribute to the preservation of the

natural environment.

● SMBC’s Environmental Program NPO C.C.C Furano Field
SMBC also provides support to an environmental project imple-

mented by screenwriter Sou Kuramoto in the Furano area of

Hokkaido. Activities under this project include enlisting the assis-

tance of volunteers in planting seedlings in golf courses that have

gone out of business with the goal of restoring these former forest

areas to their once pristine condition. This project also sponsors

environmental education activities that enable persons to experi-

ence nature with their five senses. SMBC and its employees with

an interest in this project and their families participate in and help

conduct tours in the area to experience and enable others to expe-

rience nature firsthand.

implementing the UNICEF Donation Account program. This program

enables customers to donate their interest earnings after tax to UNICEF

and SMBC provides a matching donation.

SMBC collects donations of foreign coins

The coins and bills collected are sorted by cur-

and bills for UNICEF at its branches.

rency and then delivered to UNICEF.

* Sumitomo Mitsui Card and VJA group companies collects donations from

VISA cardholders every year through its World Present point service for

member companies of the VISA Japan Association. These donations are

then given to the Japan Committee for UNICEF. Since the start of the pro-

gram in 1992, total donations have exceeded ¥200 million. Beginning in

April 2007, we have also commenced donations to the Japanese National

Commission for UNESCO and the World Wildlife Fund Japan (WWF-

Japan). Sumitomo Mitsui Card also issues cards that automatically make

donations to specific charities, such as the UNICEF VISA Card and the Red

Feather VISA Card (offered in cooperation with the Central Community

Chest of Japan). To contribute further to a better society, Sumitomo Mitsui

Card also makes its own donations to the working funds of all these organi-

zations from its card business revenues.

SMFG 2008

SMBC engages in a range of edu-

cational activities to promote the

understanding of finance and eco-

nomics. For example, the bank

supported to issue a book entitled

“What Does Bank Do?” and pro-

vides a section on its web site

called “Exciting Exploration of Banking Activities.” SMBC is also a

sponsor of the Kidzania Tokyo job-experience theme park for chil-

dren and offers bank tours for primary school students during

summer vacation entitled “Summer Vacation Fun! Let’s Explore

Banking Activities!” Among other educational activities, SMBC also

supports the “Finance Park,” an educational program on econom-

ics for junior high and high school students in Tokyo’s Shinagawa

Ward, holds finance and economics seminars at universities, and

conducts other similar programs.

● Student Internship Program
JRI instituted its internship program in 1999, in recognition of the

growing importance placed on giving students the opportunity to

spend time in different workplaces prior to their graduation to gain

a better understanding of work activities. Since fiscal 2006, the

program has been sponsored jointly with JRI Solutions, and, in fis-

cal 2007, about 80 university students were accepted. The interns

were assigned to IT systems, consulting, think tank, and many

other workplaces, allowing them the opportunity to experience a

wide range of work experience.

* At Sumitomo Mitsui Finance and Leasing, employees of Osaka Head

Office are contributing to the beautification of the community through their

continuing participation on a voluntary basis in a regular early-morning

neighborhood cleanup conducted along Midosuji Street, a major thorough-

fare.

* Employees of JRI and JRI Solutions respond to calls from local communi-

ties and participate in cleanup activities, mainly in the vicinity of their Tokyo

and Osaka headquarters.

● Contributions to Private Nature Conservation Groups
JRI undertakes research for the Eco Fund, an investment trust that

targets environmentally responsible companies, to assist this fund

in making selections of companies appropriate for investment. JRI

then donates part of the fees received for this research to private-

sector nature conservation groups.

Contributing to Cultural, Artistic, and Education Activities
We also sponsor cultural, artistic and educational events.

● Sponsoring of Charity Concert Entitled “A Toy Box of Favorite
Works”

Since fiscal 2006, SMBC has sponsored a charity concert to pro-

vide support for the world’s children who have been injured by

wars, natural disasters, and other disasters. SMBC’s employee

music societies perform a range of musical pieces that appeal to

everyone from children to adults. Donations are collected from the

audience at the concerts, and artwork submitted by children

around the world is displayed in the concert hall lobby. In addition,

a charity bazaar is held featuring items for sale that have been

handcrafted by SMBC employees. This event was held for the third

time in April 2008,

and, as in the previ-

ous year, it was

presented in the

Casals Hall in Nihon

University with a

large number in

attendance.

SMFG 2008 65

Human Resources

SMFG and the Group companies strive to create a workplace for their human resources where each and every employee can take pride in

and be highly motivated about his or her work. In the following pages, we would like to introduce some of SMBC’s initiatives in the human

resources area.

Four Goals of SMBC’s Human Resource Management
The primary goal of SMBC is to develop together with its four pri-

mary stakeholder groups: its customers, shareholders and market,

society and environment, and employees. To achieve this goal,

● Providing Support for a Good Work-Life Balance
In fiscal 2007, SMBC established its Child-Care Subsidy Fund,
which reimburses employees for up to ￥50,000 for monthly after-
school child-care and babysitting expenses. In addition, we have

SMBC has established four objectives for its human resource man-

created a new system for the reimbursement of transportation

agement system.

● To promote the creation of an even more powerful business culture
and practices that will enable SMBC to compete in global markets

● Develop staff with specialized professional skills who can

expenses for going to and from care centers and other child facili-

ties. Also, in June 2008, we increased the number of days that

employees can take off for taking care of a sick family member,

and also lengthened the periods for shorter working hours, time off

provide customers with value-added services

for taking care of a sick child, and the provision of a child-care

● Motivate employees even more strongly by respecting their

individuality and encouraging them to seek personal fulfillment

● Foster a corporate culture that encourages a forward-looking

and creative attitude

Creating a Corporate Culture that Derives Strength from Diversity
● Employing a Diversity of Human Resources
SMBC is implementing initiatives to create a workplace where gen-

subsidy to the third year of primary school. We are listening to the
needs of our employees and working to create more enhanced

systems to achieve a good balance between work and household

requirements. For example, to date, more than 20 male employees

have made use of our system for allowing husbands to take short

periods of about two weeks off to assist with child rearing. In addi-

tion, our monthly lectures to provide support for employees

planning to return to work after time off for child rearing have

der, nationality, and other superficial characteristics are not an

entered their third year, and more than 450 persons have attended

issue and where a diversity of personnel can make active contribu-

these sessions. Also, to promote communication between employ-

tions. The ratio of women newly hired for the year beginning in

ees and their families, we sponsor our SMBC Children’s Visitation

April 2008 for generalist and consumer services positions

Program, which allows children to visit their mothers or fathers at

exceeded 40%, and the number of women holding managerial

work. These visits also provide an opportunity for educating family

positions has increased substantially. In April 2007, we appointed

members about the work of SMBC and about finance and eco-

two non-Japanese officers as executive directors to strengthen our

nomics.

investment banking services in Europe and the Americas, and, in

Japan, we are also actively hiring individuals of foreign nationality.

In fiscal 2008, the current fiscal year, we will establish a Diver-

sity and Inclusion Department within our Human Resources Dept.

and implement other initiatives for creating a corporate culture that

derives strengthen from diversity.

● Employing Physically Challenged Persons
We have established a special corporation, SMBC Green Service

Co., Ltd., that promotes the employment of persons with disabili-

ties. We make arrangements for many physically challenged

persons and representatives from other companies with an interest

in employing persons with disabilities to visit SMBC and partici-

pate in practical training. As a result, we have received awards

from many sources for our significant contributions to the employ-

ment of the physically challenged. In addition, we encourage our

personnel to participate actively in skill competitions for the dis-

abled that are sponsored by city and local governments in Japan.

In the past, we have sent a number of our physically challenged

employees to participate in the National Skill Competition for the

Disabled (known as the “Abilinpic”). Please note that, as of March

2008, 2.05% of our employees had physical disabilities, which is

well above the 1.8% required under relevant legal provisions.

SMFG 2008

● Work relocations

To enable employees with job categories that do not normally provide
for relocation transfers to request reassignments to other locations due
to marriage, relocation of one’s spouse, or other reasons.

● Leave for taking care of sick children

Employees may take leaves to care for sick children who are in their
third year of primary school or younger. (Leaves are up to 5 days a year
for one child and 10 days a year for two or more children.)

● Half-day vacation time

Employees can use their annual allotment of vacation days in half-day
increments, to give them the flexibility to attend school events and take
care of other personal matters.

● System for rehiring former employees

Employees who have resigned due to marriage, childbirth, child rearing,
or caring for a parent can apply to be rehired within five years of their
resignations.
● Parental leave

Employees are allowed to take parental leave until the child is 24 months
old.

● Shorter working hours

For employees with children in school up to the end of the third year of
primary school, SMBC has two types of systems that employees may
choose from to give them time to drop off children at a daycare center
and pick them up at the end of the day. One system enables them to
shorten their working day, and the other makes it possible to designate
one day each week as a day off.

● Leave for caring for senior or disabled family members

Employees may take leaves of absence to take care of a disabled or
elderly family member.

● Child-care subsidies

For employees with children up to the end of the third year of primary
school, SMBC offers subsidies up to a monthly limit of ¥50,000 to pay for
after-school care and babysitting.

● Subsidies for transportation to and from child-care centers

To help pay for transportation costs to and from child-care centers and
other such transportation expenses, SMBC offers a system that pays the
cost of having parents take a detour to the care center, etc., from their
regular commuting route.
● Child-care support system

To lighten the economic burden of child rearing for employees, we
provide child-care center and babysitting services through an employee
benefit services outsourcing company at a discount.

A session of SMBC Children’s Visitation Program

Training Staff with Specialized Professional Skills
● Training for Younger Employees
To provide a high level of motivation for growth and development

among younger personnel, SMBC has instituted its Rising Rookie

Program and the SMBC Retail Banking College. Instruction in busi-

ness knowledge and skills, which formerly was conducted over

several years, has now been concentrated into a period of six

months and is conducted efficiently by combining on-the-job train-

ing and classroom courses. In addition, we have built new training

facilities in Nagoya, Tokyo, and Osaka to meet the growing need

for training courses.

● Training at Overseas Offices
We are also devoting resources to the training of international staff.

In fiscal 2007, we newly formed the Asia Pacific Training Depart-

ment within our Planning Dept., International Banking Unit, and

established a training room in Singapore. For employees in the

Asian and Oceanian regions, we conduct various types of training

programs, focused on business training and development of

capabilities and skills. Through these activities we are taking the

initiative in developing our human resources on a global scale.

Personnel Systems
● Expanding In-House Recruitment Systems
To raise the level of specialized knowledge as financial profession-

als among all employees, it is indispensable to provide systems for

employees to gain a grasp of their aptitudes and skills and make

their own decisions on the fields where they will show and take full

advantage of their capabilities. One of the systems that SMBC has

created to support employees in designing their own careers on

their own initiative is the in-house recruitment system, which has

three entry points: namely, the training entry point, the job entry

point, and the post-entry point.

In the case of the job entry point, SMBC holds its SMBC Job

Forum, which is an in-house seminar where 50 or more depart-

ments introduce their work and appeal to other employees to join

them. This forum not only increases interest in the in-house recruit-

ment system but also improves understanding among staff about a

wide range of jobs within the bank, thus providing employees with

the opportunity to think about their career design. In fiscal 2007, a

total of more than 1,000 young to mid-career employees, in east-

ern and western Japan together, attended these seminars.

Employees attending the SMBC Job Forum to learn about in-house job opportunities

● Establishing a New Business Career Path
Beginning in fiscal 2008, we will realign our existing support staff

career track by establishing the Business Career Path, which will

expand the range of work activities and raise interest among

employees in different career opportunities. Among job types, we

will introduce a “corporate course” and an “operation course”

among work and career paths. We will also create managerial lev-

els and, valuing the lifestyles and career views of motivated

employees, open up fields where they can make even greater con-

tributions. In addition, from among temporary and contract

employees working at our branches, we will hire about 2,000 of

these staff as regular employees to go on the Business Career

Path.

Local staff participating in a training session in Singapore

SMFG 2008 67

Human Resources

SMFG and the Group companies strive to create a workplace for their human resources where each and every employee can take pride in

and be highly motivated about his or her work. In the following pages, we would like to introduce some of SMBC’s initiatives in the human

resources area.

Four Goals of SMBC’s Human Resource Management
The primary goal of SMBC is to develop together with its four pri-

mary stakeholder groups: its customers, shareholders and market,

society and environment, and employees. To achieve this goal,

SMBC has established four objectives for its human resource man-

created a new system for the reimbursement of transportation

agement system.

● To promote the creation of an even more powerful business culture
and practices that will enable SMBC to compete in global markets

● Develop staff with specialized professional skills who can

expenses for going to and from care centers and other child facili-

ties. Also, in June 2008, we increased the number of days that

employees can take off for taking care of a sick family member,

and also lengthened the periods for shorter working hours, time off

provide customers with value-added services

for taking care of a sick child, and the provision of a child-care

● Motivate employees even more strongly by respecting their

individuality and encouraging them to seek personal fulfillment

● Foster a corporate culture that encourages a forward-looking

and creative attitude

Creating a Corporate Culture that Derives Strength from Diversity
● Employing a Diversity of Human Resources
SMBC is implementing initiatives to create a workplace where gen-

subsidy to the third year of primary school. We are listening to the
needs of our employees and working to create more enhanced

systems to achieve a good balance between work and household

requirements. For example, to date, more than 20 male employees

have made use of our system for allowing husbands to take short

periods of about two weeks off to assist with child rearing. In addi-

tion, our monthly lectures to provide support for employees

planning to return to work after time off for child rearing have

der, nationality, and other superficial characteristics are not an

entered their third year, and more than 450 persons have attended

issue and where a diversity of personnel can make active contribu-

these sessions. Also, to promote communication between employ-

tions. The ratio of women newly hired for the year beginning in

ees and their families, we sponsor our SMBC Children’s Visitation

April 2008 for generalist and consumer services positions

Program, which allows children to visit their mothers or fathers at

exceeded 40%, and the number of women holding managerial

work. These visits also provide an opportunity for educating family

positions has increased substantially. In April 2007, we appointed

members about the work of SMBC and about finance and eco-

two non-Japanese officers as executive directors to strengthen our

nomics.

investment banking services in Europe and the Americas, and, in

Japan, we are also actively hiring individuals of foreign nationality.

In fiscal 2008, the current fiscal year, we will establish a Diver-

sity and Inclusion Department within our Human Resources Dept.

and implement other initiatives for creating a corporate culture that

derives strengthen from diversity.

● Employing Physically Challenged Persons
We have established a special corporation, SMBC Green Service

Co., Ltd., that promotes the employment of persons with disabili-

ties. We make arrangements for many physically challenged

persons and representatives from other companies with an interest

in employing persons with disabilities to visit SMBC and partici-

pate in practical training. As a result, we have received awards

from many sources for our significant contributions to the employ-

ment of the physically challenged. In addition, we encourage our

personnel to participate actively in skill competitions for the dis-

abled that are sponsored by city and local governments in Japan.

In the past, we have sent a number of our physically challenged

employees to participate in the National Skill Competition for the

Disabled (known as the “Abilinpic”). Please note that, as of March

2008, 2.05% of our employees had physical disabilities, which is

well above the 1.8% required under relevant legal provisions.

SMFG 2008

● Work relocations

● Leave for taking care of sick children

● Half-day vacation time

Employees can use their annual allotment of vacation days in half-day
increments, to give them the flexibility to attend school events and take
care of other personal matters.

● System for rehiring former employees

Employees who have resigned due to marriage, childbirth, child rearing,
or caring for a parent can apply to be rehired within five years of their
resignations.
● Parental leave

Employees are allowed to take parental leave until the child is 24 months
old.

● Shorter working hours

● Leave for caring for senior or disabled family members

Employees may take leaves of absence to take care of a disabled or
elderly family member.

● Child-care subsidies

For employees with children up to the end of the third year of primary
school, SMBC offers subsidies up to a monthly limit of ¥50,000 to pay for
after-school care and babysitting.

● Subsidies for transportation to and from child-care centers

To lighten the economic burden of child rearing for employees, we
provide child-care center and babysitting services through an employee
benefit services outsourcing company at a discount.

A session of SMBC Children’s Visitation Program

Training Staff with Specialized Professional Skills
● Training for Younger Employees
To provide a high level of motivation for growth and development

among younger personnel, SMBC has instituted its Rising Rookie

Program and the SMBC Retail Banking College. Instruction in busi-

ness knowledge and skills, which formerly was conducted over

several years, has now been concentrated into a period of six

months and is conducted efficiently by combining on-the-job train-

ing and classroom courses. In addition, we have built new training

facilities in Nagoya, Tokyo, and Osaka to meet the growing need

for training courses.

● Training at Overseas Offices
We are also devoting resources to the training of international staff.

In fiscal 2007, we newly formed the Asia Pacific Training Depart-

ment within our Planning Dept., International Banking Unit, and

established a training room in Singapore. For employees in the

Asian and Oceanian regions, we conduct various types of training

programs, focused on business training and development of

capabilities and skills. Through these activities we are taking the

initiative in developing our human resources on a global scale.

Personnel Systems
● Expanding In-House Recruitment Systems
To raise the level of specialized knowledge as financial profession-

als among all employees, it is indispensable to provide systems for

employees to gain a grasp of their aptitudes and skills and make

their own decisions on the fields where they will show and take full

advantage of their capabilities. One of the systems that SMBC has

created to support employees in designing their own careers on

their own initiative is the in-house recruitment system, which has

three entry points: namely, the training entry point, the job entry

point, and the post-entry point.

In the case of the job entry point, SMBC holds its SMBC Job

Forum, which is an in-house seminar where 50 or more depart-

ments introduce their work and appeal to other employees to join

them. This forum not only increases interest in the in-house recruit-

ment system but also improves understanding among staff about a

wide range of jobs within the bank, thus providing employees with

the opportunity to think about their career design. In fiscal 2007, a

total of more than 1,000 young to mid-career employees, in east-

ern and western Japan together, attended these seminars.

Employees attending the SMBC Job Forum to learn about in-house job opportunities

● Establishing a New Business Career Path
Beginning in fiscal 2008, we will realign our existing support staff

career track by establishing the Business Career Path, which will

expand the range of work activities and raise interest among

employees in different career opportunities. Among job types, we

will introduce a “corporate course” and an “operation course”

among work and career paths. We will also create managerial lev-

els and, valuing the lifestyles and career views of motivated

employees, open up fields where they can make even greater con-

tributions. In addition, from among temporary and contract

employees working at our branches, we will hire about 2,000 of

these staff as regular employees to go on the Business Career

Path.

Local staff participating in a training session in Singapore

SMFG 2008 67

Heightening Awareness of Individual Rights
At SMBC, we have included in our principles of action the con-

cepts that “we will respect the individual human dignity of our

customers and employees” and “we will not permit discrimination

of any kind.” We are implementing the following initiatives to

heighten the awareness of all employees regarding individual

rights.

● Conducting training meetings for manager level staff (once a

year), and personnel newly appointed to management

positions and staff who have recently joined the bank

● Holding study meetings to discuss individual rights issues, with

manager level personnel leading these sessions (twice a year)

● Soliciting slogans promoting individual rights from manage-

ment and staff (once a year)

Also, in fiscal 2007, SMBC began to participate in the United

Nations Global Compact, thereby agreeing to embrace, support

and enact 10 principles in the areas of human rights, labor stan-

dards, the environment, and anti-corruption.

● SMBC Among the Best 25 Companies in Japan as “A Great Place to Work”
In January 2008, SMBC was selected as one of the best companies in
Japan as a place to work in the survey conducted by Great Place to
Work® Institute Japan.
* Great Place to Work® Institute, Inc., a U.S. company, is a survey

organization that supplies data for the annual list of the “100 Best
Places to Work®” published by Fortune magazine. The survey has two
major components, a survey of the internal systems and corporate
culture of respondent companies and a questionnaire survey of the
employees of these companies. The results of the survey of
employees receive a weighting of two-thirds in determining the final
results.

Staff Profile

March 31

Number of employees*

Male

Female

Average age

Male

Female

Average years of service

Male

Female

Ratio of employees
with disabilities
(% of total)**

2006

20,322

13,955

6,367

39.0

41.3

34.0

16.9

18.4

13.4

2007

19,723

13,424

6,299

39.0

41.2

34.5

16.8

18.2

13.7

2008

20,273

13,457

6,816

38.7

40.10

34.2

15.11

17.5

12.11

1.99%

2.03%

2.05%

* The number of full-time employees, including employees temporarily dispatched to other
companies and organizations. The following have all been excluded from this total: execu-
tive officers, employees on short-term contracts, part-time employees, temporary staff
employees, and local staff at overseas branches.

** As of March 1 of the respective years

April 1

2004

2005

2006

2007

2008

Number of newly employed
female graduates***

Ratio of newly employed
females to total new employees

143

208

252

380

518

36.2

38.1

36.3

40.0

41.3

*** Includes key employees, which includes generalist staff and consumer service staff.
General office employees are excluded.

Fiscal

2004

2005

2006

2007

2008

167

193

235

280

354

126

163

—

500

181

156

Number of women in
managerial positions****

Number taking leave
for child rearing

Men taking such leaves

Number of career hires

**** As of the end of the fiscal year

● SMBC Receives Award for Promotion of Gender Equality and Work-

Home Compatibility from Japan’s Ministry of Health, Labour and Welfare.
SMBC received an award for excellence in the gender equality pro-
motion section of the award given by the Tokyo Labor Department as
part of the fiscal 2007 corporate awards for gender equality and work-
home compatibility sponsored by the Ministry of Health, Labour and
Welfare. We received this award as “a company taking active initiatives
to draw fully on the abilities of female employees.” SMBC was cited for
having “a wide range of departments that promote the employment of
women” and “having support systems for attaining a balance between
work and home responsibilities.

SMFG 2008

Financial Section and Corporate Data

Financial Section

SMFG

Corporate Data

Sumitomo Mitsui Financial Group, Inc.

Consolidated Balance Sheets........................................ 70

Board of Directors, Corporate Auditors,

Consolidated Statements of Income.............................. 72

Consolidated Statements of

Changes in Net Assets ............................................... 73

Consolidated Statements of Cash Flows....................... 74

Notes to Consolidated Financial Statements................. 76

Independent Auditors’ Report ........................................ 122

and Executive Officers ........................................... 199

SMFG Organization .................................................. 199

Sumitomo Mitsui Banking Corporation

Board of Directors, Corporate Auditors,

and Executive Officers ........................................... 200

SMBC Organization .................................................. 202

SMBC

Supplemental Information.............................................. 123

Principal Subsidiaries and Affiliates

SMFG

Principal Domestic Subsidiaries ................................ 204

Principal Overseas Subsidiaries ............................... 205

Principal Affiliates ...................................................... 206

Income Analysis (Consolidated) .................................... 128

International Directory ................................................ 207

Assets and Liabilities (Consolidated)............................. 131

Capital (Nonconsolidated) ............................................. 134

Capital Ratio Information (Consolidated)....................... 138

SMBC

Income Analysis (Consolidated) .................................... 171

Assets and Liabilities (Consolidated)............................. 174

Income Analysis (Nonconsolidated) .............................. 176

Deposits (Nonconsolidated)........................................... 180

Loans (Nonconsolidated)............................................... 182

Securities (Nonconsolidated)......................................... 187

Ratios (Nonconsolidated) .............................................. 189

Capital (Nonconsolidated) ............................................. 191

Others (Nonconsolidated).............................................. 192

Trust Assets and Liabilities (Nonconsolidated).............. 194

Capital Ratio Information ............................................... 197

SMFG 2008 69

Consolidated Balance Sheets

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

March 31

Assets
Cash and due from banks (Note 10)...................................................................
Deposits with banks (Notes 10 and 31) ..............................................................
Call loans and bills bought ..................................................................................
Receivables under resale agreements ...............................................................
Receivables under securities borrowing transactions.........................................
Commercial paper and other debt purchased (Notes 10 and 31).......................
Trading assets (Notes 3, 10 and 31)...................................................................
Money held in trust (Note 31)..............................................................................
Securities (Notes 4, 10 and 31) ..........................................................................
Loans and bills discounted (Notes 5 and 10)......................................................
Foreign exchanges .............................................................................................
Other assets (Notes 6 and 10)............................................................................
Tangible fixed assets (Notes 7 and 17) ..............................................................
Intangible fixed assets (Note 8) ..........................................................................
Lease assets (Note 9).........................................................................................
Deferred tax assets (Note 26).............................................................................
Customers’ liabilities for acceptances and guarantees.......................................
Reserve for possible loan losses ........................................................................
Total assets .......................................................................................................

Millions of yen

Millions of
U.S. dollars (Note 1)

2008

2007

2008

2,736,752
2,280,573
595,802
357,075
1,940,170
1,153,070
4,123,611
7,329
23,517,501
62,144,874
893,567
4,951,587
820,411
332,525
1,425,097
985,528
4,585,141
(894,702)
¥111,955,918

1,927,024
2,109,831
1,107,078
76,551
2,276,894
963,916
3,277,885
2,924
20,537,500
58,689,322
881,436
3,349,949
817,567
234,896
1,001,346
887,224
3,606,050
(889,093)
¥100,858,309

27,316
22,762
5,947
3,564
19,365
11,509
41,158
73
234,729
620,270
8,919
49,422
8,188
3,319
14,224
9,837
45,764
(8,930)
$1,117,436

SMFG 2008

(Continued)

March 31

Liabilities and net assets
Liabilities
Deposits (Notes 10 and 11) ................................................................................
Call money and bills sold (Note 10) ....................................................................
Payables under repurchase agreements (Note 10) ............................................
Payables under securities lending transactions (Note 10)..................................
Trading liabilities (Notes 10 and 12) ...................................................................
Borrowed money (Notes 10 and 13) ...................................................................
Foreign exchanges .............................................................................................
Short-term bonds (Note 14) ................................................................................
Bonds (Note 14)..................................................................................................
Due to trust account............................................................................................
Other liabilities (Notes 10 and 15).......................................................................
Reserve for employee bonuses ..........................................................................
Reserve for executive bonuses...........................................................................
Reserve for employee retirement benefits (Note 29) ..........................................
Reserve for executive retirement benefits ..........................................................
Reserve for reimbursement of deposits ..............................................................
Reserve under special laws (Note 16) ................................................................
Deferred tax liabilities (Note 26)..........................................................................
Deferred tax liabilities for land revaluation (Note 17) ..........................................
Acceptances and guarantees (Note 10) .............................................................
Total liabilities ...................................................................................................

Net assets (Note 27)
Capital stock (Note 19) .......................................................................................
Capital surplus ....................................................................................................
Retained earnings...............................................................................................
Treasury stock (Note 27) ....................................................................................
Total stockholders’ equity ...............................................................................
Net unrealized gains on other securities (Note 31).............................................
Net deferred losses on hedges ...........................................................................
Land revaluation excess (Note 17) .....................................................................
Foreign currency translation adjustments ...........................................................
Total valuation and translation adjustments..................................................
Stock acquisition rights (Note 33) .......................................................................
Minority interests (Note 18).................................................................................
Total net assets.................................................................................................
Total liabilities and net assets .........................................................................

See accompanying notes to consolidated financial statements.

Millions of yen

Millions of
U.S. dollars (Note 1)

2008

2007

2008

¥ 75,768,773
2,638,142
1,832,467
5,732,042
2,671,316
4,279,034
301,123
769,100
3,969,308
80,796
3,916,427
29,267
1,171
38,701
7,998
10,417
1,118
52,046
47,446
4,585,141
106,731,842

1,420,877
57,826
1,740,610
(123,989)
3,095,324
550,648
(75,233)
34,910
(27,323)
483,002
43
1,645,705
5,224,076
¥111,955,918

¥ 74,745,441
2,286,698
140,654
1,516,342
1,942,973
3,214,137
323,890
439,600
4,093,525
65,062
2,981,714
27,513
—
34,424
7,371
—
1,137
50,953
49,536
3,606,050
95,527,029

1,420,877
57,773
1,386,436
(123,454)
2,741,632
1,262,135
(87,729)
37,605
(30,656)
1,181,353
14
1,408,279
5,331,279
¥100,858,309

$ 756,251
26,331
18,290
57,212
26,663
42,709
3,006
7,676
39,618
806
39,090
292
12
386
80
104
11
519
474
45,764
1,065,294

14,182
577
17,373
(1,237)
30,895
5,496
(751)
349
(273)
4,821
0
16,426
52,142
$1,117,436

SMFG 2008 71

Consolidated Statements of Income

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Year ended March 31

Income
Interest income:

Interest on loans and discounts .....................................................................
Interest and dividends on securities ..............................................................
Interest on receivables under resale agreements..........................................
Interest on receivables under securities borrowing transactions ...................
Interest on deposits with banks .....................................................................
Other interest income ....................................................................................
Trust fees ............................................................................................................
Fees and commissions (Note 20) .......................................................................
Trading profits (Note 21) .....................................................................................
Other operating income (Note 22) ......................................................................
Other income (Note 24) ......................................................................................
Total income......................................................................................................

Expenses
Interest expenses:

Interest on deposits .......................................................................................
Interest on borrowings and rediscounts .........................................................
Interest on payables under repurchase agreements .....................................
Interest on payables under securities lending transactions ...........................
Interest on bonds and short-term bonds ........................................................
Other interest expenses.................................................................................
Fees and commissions (Note 20) .......................................................................
Trading losses (Note 21).....................................................................................
Other operating expenses (Note 23)...................................................................
General and administrative expenses.................................................................
Provision for reserve for possible loan losses.....................................................
Other expenses (Note 25)...................................................................................
Total expenses ..................................................................................................
Income before income taxes and minority interests .....................................
Income taxes (Note 26):

Current ...........................................................................................................
Deferred .........................................................................................................
Minority interests in net income ..........................................................................
Net income.........................................................................................................

See accompanying notes to consolidated financial statements.

Millions of yen

Millions of
U.S. dollars (Note 1)

2008

2007

2008

¥1,583,837
333,255
7,044
7,032
101,120
113,160
3,752
704,283
469,571
1,212,635
203,346
4,739,040

546,794
71,391
7,404
45,499
95,051
168,926
92,289
—
1,392,089
978,896
71,278
340,463
3,810,084
928,955

¥1,404,060
369,770
7,098
4,857
96,763
96,517
3,508
705,998
127,561
1,003,632
128,017
3,947,786

500,555
50,984
18,354
60,856
91,223
88,502
96,812
1,936
1,004,370
888,561
23,663
315,175
3,140,996
806,790

103,900
282,538
80,980
¥ 461,536

87,818
218,770
58,850
¥ 441,351

$15,808
3,326
70
70
1,009
1,130
38
7,030
4,687
12,103
2,030
47,301

5,458
713
74
454
949
1,686
921
—
13,895
9,770
711
3,398
38,029
9,272

1,037
2,820
808
$ 4,607

SMFG 2008

Consolidated Statements of Changes in Net Assets

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Millions of yen

Year ended March 31, 2008

Capital
stock

Capital
surplus

Retained
earnings

Treasury
stock

Total
stockholders’
equity

Net
unrealized
gains on other
securities

Stockholders’ equity

Valuation and translation adjustments
Foreign
currency
translation
adjustments

Land
revaluation
excess

Net deferred
losses on
hedges

Total
valuation and
translation
adjustments

Stock
acquisition
rights

Minority
interests

Total net
assets

Balance at March 31, 2007 .............................

¥ 1,420,877

¥ 57,773

¥ 1,386,436

¥ (123,454)

¥ 2,741,632

¥ 1,262,135

¥(87,729)

¥ 37,605

¥(30,656)

¥ 1,181,353

¥ 14

¥ 1,408,279

¥ 5,331,279

Changes in the year

Cash dividends ......................................................

Net income.............................................................

Acquisition of own shares......................................

Disposal of treasury shares....................................

Increase due to increase in subsidiaries.................

Increase due to decrease in subsidiaries................

Decrease due to increase in subsidiaries ...............

Decrease due to decrease in subsidiaries...............

Transfer from land revaluation excess....................

Net changes in the items other than

stockholders’ equity in the year...........................

(110,215)

461,536

268

(100)

(3)

2,681

(901)

367

(110,215)

461,536

(901)

420

268

(100)

(3)

2,681

(711,486)

12,495

Net changes in the year..........................................

—

354,173

(534)

353,692

(711,486)

12,495

(110,215)

461,536

(901)

420

268

(100)

(3)

2,681

(2,694)

3,333

(698,351)

237,426

(460,895)

237,426

(107,203)

Balance at March 31, 2008 .............................

¥1,420,877

¥57,826

¥1,740,610

¥(123,989)

¥3,095,324

¥ 550,648

¥(75,233)

¥34,910

¥(27,323)

¥ 483,002

¥43

¥1,645,705

¥5,224,076

Millions of yen

Year ended March 31, 2007

Capital
stock

Capital
surplus

Retained
earnings

Treasury
stock

Total
stockholders’
equity

Net
unrealized
gains on other
securities

Stockholders’ equity

Valuation and translation adjustments
Foreign
currency
translation
adjustments

Land
revaluation
excess

Net deferred
losses on
hedges

Total
valuation and
translation
adjustments

Stock
acquisition
rights

Minority
interests

Total net
assets

Balance at March 31, 2006 .............................

¥ 1,420,877

¥ 1,229,225

992,064

(4,393)

¥ 3,637,773

819,927

—

¥ 38,173

¥ (41,475)

816,625

¥—

¥ 1,113,025

¥ 5,567,424

Changes in the year

Increase due to exchange of shares........................

221,365

Cash dividends ......................................................

Net income.............................................................

Acquisition of own shares......................................

Disposal of treasury shares....................................

Retirement of treasury shares.................................

Increase due to increase in subsidiaries.................

Increase due to decrease in subsidiaries................

Decrease due to increase in subsidiaries ...............

Decrease due to decrease in subsidiaries...............

Transfer from land revaluation excess....................

Net changes in the items other than

stockholders’ equity in the year...........................

3,459

(1,396,277)

221,365

(47,951)

441,351

(1,519,599)

4,260

7,720

1,396,277

—

396

(16)

(5)

575

(47,951)

441,351

396

(16)

(5)

575

442,207

(87,729)

Net changes in the year..........................................

—

(1,171,452)

394,372

(119,061)

(896,141)

442,207

(87,729)

221,365

(47,951)

441,351

(1,519,599)

7,720

—

396

(16)

(5)

575

(568)

10,818

364,728

295,254

659,996

295,254

(236,144)

Balance at March 31, 2007 .............................

¥ 1,420,877

57,773

¥ 1,386,436

¥ (123,454)

¥ 2,741,632

¥ 1,262,135

¥ (87,729)

¥ 37,605

¥ (30,656)

¥ 1,181,353

¥ 14

¥ 1,408,279

¥ 5,331,279

Millions of U.S. dollars (Note 1)

Year ended March 31, 2008

Capital
stock

Capital
surplus

Retained
earnings

Treasury
stock

Total
stockholders’
equity

Net
unrealized
gains on other
securities

Stockholders’ equity

Valuation and translation adjustments
Foreign
currency
translation
adjustments

Land
revaluation
excess

Net deferred
losses on
hedges

Total
valuation and
translation
adjustments

Stock
acquisition
rights

Minority
interests

Total net
assets

Balance at March 31, 2007 .............................

$ 14,182

$ 577

$ 13,838

$ (1,232)

$ 27,365

$12,597

$ (876)

$ 376

$ (306)

$11,791

$ 0

$ 14,056

$ 53,212

Changes in the year

Cash dividends ......................................................

Net income.............................................................

Acquisition of own shares......................................

Disposal of treasury shares....................................

Increase due to increase in subsidiaries.................

Increase due to decrease in subsidiaries................

Decrease due to increase in subsidiaries ...............

Decrease due to decrease in subsidiaries...............

Transfer from land revaluation excess....................

Net changes in the items other than

stockholders’ equity in the year...........................

(1,100)

4,607

(1,100)

4,607

(9)

(1)

(0)

(1)

(0)

Net changes in the year..........................................

—

3,535

(5)

3,530

(7,101)

125

(27)

(6,970)

Balance at March 31, 2008 .............................

$14,182

$577

$17,373

$(1,237)

$30,895

$ 5,496

$(751)

$349

$(273)

$ 4,821

See accompanying notes to consolidated financial statements.

(1,100)

4,607

(9)

(1)

(0)

2,370

(4,600)

(1,070)

$16,426

$52,142

SMFG 2008 73

Consolidated Statements of Cash Flows

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Year ended March 31

1. Cash flows from operating activities:

Income before income taxes and minority interests .................................
Depreciation of fixed assets......................................................................
Depreciation of lease assets.....................................................................
Losses on impairment of fixed assets.......................................................
Amortization of goodwill............................................................................
Equity in losses of affiliates.......................................................................
Losses (gains) on sale of subsidiaries’ shares and

gains on change in equity of subsidiary.................................................
Net change in reserve for possible loan losses ........................................
Net change in reserve for employee bonuses ..........................................
Net change in reserve for executive bonuses...........................................
Net change in reserve for employee retirement benefits ..........................
Net change in reserve for executive retirement benefits ..........................
Net change in reserve for reimbursement of deposits ..............................
Interest income .........................................................................................
Interest expenses .....................................................................................
Net losses on securities............................................................................
Net gains from money held in trust ...........................................................
Net exchange losses (gains) ....................................................................
Net losses from disposal of fixed assets...................................................
Net gains from disposal of lease assets ...................................................
Net change in trading assets ....................................................................
Net change in trading liabilities .................................................................
Net change in loans and bills discounted .................................................
Net change in deposits ............................................................................
Net change in negotiable certificates of deposit ......................................
Net change in borrowed money (excluding subordinated debt) ...............
Net change in deposits with banks ...........................................................
Net change in call loans and bills bought and others ...............................
Net change in receivables under securities borrowing transactions.........
Net change in call money and bills sold and others..................................
Net change in commercial paper ..............................................................
Net change in payables under securities lending transactions.................
Net change in foreign exchanges (assets) ...............................................
Net change in foreign exchanges (liabilities) ............................................
Net change in short-term bonds (liabilities) ..............................................
Issuance and redemption of bonds (excluding subordinated bonds) .......
Net change in due to trust account ...........................................................
Interest received .......................................................................................
Interest paid ..............................................................................................
Other, net..................................................................................................
Subtotal ...................................................................................................
Income taxes paid.....................................................................................
Net cash provided by (used in) operating activities.................................

Millions of yen

Millions of
U.S. dollars (Note 1)

2008

2007

2008

928,955
83,346
403,775
5,161
10,520
41,760

806,790
78,869
335,399
30,548
4,858
104,170

$ 9,272
832
4,030
51
105
417

106
(26,197)
1,289
1,146
2,178
295
10,417
(2,145,451)
935,067
29,146
(227)
355,913
1,550
(2,436)
(864,864)
747,776
(3,372,601)
776,786
497,697
333,136
(241,409)
34,765
336,724
2,044,633
—
4,215,699
(14,713)
(22,916)
42,500
(220,801)
15,733
2,146,724
(924,191)
(326,054)
5,840,942
(58,353)
5,782,588

(5,072)
(146,971)
2,128
—
(2,639)
7,371
—
(1,979,069)
810,476
71,686
(0)
(103,541)
3,067
(1,364)
767,067
(969,090)
(1,376,693)
1,307,266
(136,304)
1,141,752
(157,092)
(612,297)
(320,243)
(5,994,528)
(10,000)
(1,230,782)
66,917
(124,047)
55,700
(198,091)
(253,534)
1,966,949
(774,678)
197,841
(6,637,179)
(123,561)
(6,760,740)

1
(262)
13
11
22
3
104
(21,414)
9,333
291
(2)
3,552
15
(24)
(8,632)
7,464
(33,662)
7,753
4,968
3,325
(2,410)
347
3,361
20,408
—
42,077
(147)
(229)
424
(2,204)
157
21,427
(9,224)
(3,254)
58,299
(583)
57,716

SMFG 2008

(Continued)

Year ended March 31

2. Cash flows from investing activities:

Millions of yen

Millions of
U.S. dollars (Note 1)

2008

2007

2008

Purchases of securities.............................................................................
Proceeds from sale of securities...............................................................
Proceeds from maturity of securities ........................................................
Purchases of money held in trust ............................................................
Proceeds from sale of money held in trust ...............................................
Purchases of tangible fixed assets ...........................................................
Proceeds from sale of tangible fixed assets .............................................
Purchases of intangible fixed assets ........................................................
Proceeds from sale of intangible fixed assets ..........................................
Purchases of lease assets........................................................................
Proceeds from sale of lease assets..........................................................
Proceeds from sale of stocks of subsidiaries............................................
Purchases of stocks of subsidiaries..........................................................
Net cash provided by (used in) investing activities .................................

(50,073,494)
35,014,774
10,504,800
(5,378)
796
(71,301)
16,592
(64,918)
252
(457,070)
51,141
198
(2,951)
(5,086,559)

(35,085,809)
21,544,154
18,886,454
—
—
(193,614)
8,474
(57,506)
6
(383,526)
48,392
3,745
(1,317)
4,769,454

3. Cash flows from financing activities:

Proceeds from issuance of subordinated debt .........................................
Repayment of subordinated debt..............................................................
Proceeds from issuance of subordinated bonds and bonds with

40,000
(76,000)

20,000
(83,000)

stock acquisition rights...........................................................................

214,000

196,951

Repayment of subordinated bonds and bonds with

stock acquisition rights...........................................................................
Dividends paid ..........................................................................................
Proceeds from minority stockholders........................................................
Dividends paid to minority stockholders ...................................................
Purchases of treasury stock .....................................................................
Proceeds from sale of treasury stock .......................................................
Net cash provided by (used in) financing activities .................................

4. Effect of exchange rate changes on cash and due from banks ..............

(47,000)
(110,099)
141,500
(60,239)
(901)
853
102,112

(8,465)

(181,283)
(47,926)
360,362
(46,724)
(1,474,644)
11,320
(1,244,945)

3,434

5. Net change in cash and due from banks ...................................................

789,676

(3,232,797)

6. Cash and due from banks at beginning of year........................................

1,927,024

5,159,822

7. Change in cash and due from banks due to

merger of consolidated subsidiaries ......................................................

1,183

8. Change in cash and due from banks due to

newly consolidated subsidiaries.............................................................

18,870

9. Change in cash and due from banks due to

exclusion of consolidated subsidiaries..................................................

(3)

—

(499,785)
349,484
104,849
(54)
8
(712)
166
(648)
2
(4,562)
510
2
(29)
(50,769)

399
(759)

2,136

(469)
(1,099)
1,412
(601)
(9)
9
1,019

(84)

7,882

19,234

188

(0)

10. Cash and due from banks at end of year ..................................................

¥ 2,736,752

¥ 1,927,024

$ 27,316

See accompanying notes to consolidated financial statements.

SMFG 2008 75

Notes to Consolidated Financial Statements

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries
Years ended March 31, 2008 and 2007

1. Basis of Presentation
Sumitomo Mitsui Financial Group, Inc. (“SMFG”) was established on
December 2, 2002 as a holding company for the SMFG group through a
statutory share transfer (kabushiki iten) of all of the outstanding equity
securities of Sumitomo Mitsui Banking Corporation (“SMBC”) in
exchange for SMFG’s newly issued securities. SMFG is a joint stock
corporation with limited liability (Kabushiki Kaisha) incorporated under
the Company Law of Japan. Upon formation of SMFG and completion of
the statutory share transfer, SMBC became a direct wholly-owned
subsidiary of SMFG.

SMFG has prepared the accompanying consolidated financial

statements in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Law and its related accounting
regulations, and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements from
International Financial Reporting Standards.

The accounts of overseas subsidiaries are based on their accounting
records maintained in conformity with generally accepted accounting
principles prevailing in the respective countries of domicile.

The accompanying consolidated financial statements have been

restructured and translated into English from the consolidated financial
statements of SMFG prepared in accordance with Japanese GAAP.

Some supplementary information included in the statutory Japanese

language consolidated financial statements, but not required for fair
presentation, is not presented in the accompanying consolidated
financial statements.

Amounts less than one million yen have been omitted. As a result,

the totals in Japanese yen shown in the financial statements do not
necessarily agree with the sum of the individual amounts.

The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using the
prevailing exchange rate at March 31, 2008, which was ¥100.19 to
US$1. The convenience translations should not be construed as
representations that the Japanese yen amounts have been, could have
been, or could in the future be, converted into U.S. dollars at that rate.

2. Significant Accounting Policies
(1) Consolidation and equity method

(a) Scope of consolidation

Japanese accounting standards on consolidated financial
statements require a company to consolidate any subsidiaries
when the company substantially controls the operations, even if
it is not a majority-owned subsidiary. Control is defined as the
power to govern the decision-making body of an enterprise.
(i) Consolidated subsidiaries
The number of consolidated subsidiaries is as follows:
March 31
Consolidated subsidiaries ...................
Principal companies:

2007
181

2008
268

Sumitomo Mitsui Banking Corporation
THE MINATO BANK, LTD.
Kansai Urban Banking Corporation
Sumitomo Mitsui Banking Corporation Europe Limited
Manufacturers Bank
Sumitomo Mitsui Finance and Leasing Company, Limited
Sumitomo Mitsui Card Company, Limited
QUOQ Inc.

SMFG 2008

SMBC Finance Service Co., Ltd.
SMBC Friend Securities Co., Ltd.
The Japan Research Institute, Limited
SMBC Capital Markets, Inc.
Changes in consolidated subsidiaries in the fiscal year

ended March 31, 2008 are as follows:

Thirty-three companies including QUOQ Inc. were newly

consolidated due mainly to an increase in the shareholding
ratio. Seventy-six companies including MG Leasing
Corporation were also consolidated due to a merger between
SMBC Leasing Company, Limited and Sumisho Lease Co., Ltd.

Six companies including SMFG Corporate Recovery

Servicer Co., Ltd. were excluded from the scope of
consolidation because they were no longer subsidiaries due to
liquidation and other reasons. Also, sixteen companies
including SMLC ANTLIA Co., Ltd. were excluded from the
scope of consolidation and became unconsolidated
subsidiaries that are not accounted for by the equity method
because they became operators of silent partnerships for lease
transactions.
(ii) Unconsolidated subsidiaries
Principal company:
SBCS Co., Ltd.
Two hundred and thirty-eight subsidiaries including

SMLC MAHOGANY Co., Ltd. are operators of silent
partnerships for lease transactions and their assets and
profits/losses do not belong to them substantially. Therefore,
they have been excluded from the scope of consolidation
pursuant to Article 5 Paragraph 1 Item 2 of the Consolidated
Financial Statements Regulations.

Other unconsolidated subsidiaries are also excluded from

the scope of consolidation because their total amounts in
terms of total assets, ordinary income, net income and
retained earnings are so immaterial that they do not hinder a
rational judgment of SMFG’s financial position and results of
operations when excluded from the scope of consolidation.

Information on the fourteen special purpose entities, which
are not regarded as subsidiaries pursuant to Article 8 Paragraph
7 of the Financial Statements Regulations, is reported in Note
35. “Implementation Guidance on Disclosures about Certain
Special Purpose Entities” (Accounting Standards Board of
Japan (“ASBJ”) Guidance No. 15, issued on March 29, 2007)
is effective from the fiscal year beginning on or after April 1,
2007, and SMFG has applied the guidance from the fiscal year
ended March 31, 2008.

(b) Application of the equity method

Japanese accounting standards also require that any
unconsolidated subsidiaries and affiliates which SMFG is able
to exercise material influence over their financial and
operating policies be accounted for by the equity method.
(i) Unconsolidated subsidiaries accounted for by the equity

method

The number of unconsolidated subsidiaries accounted for by
the equity method is as follows:
March 31
Unconsolidated subsidiaries...............
Principal company:
SBCS Co., Ltd.

2007
3

2008
3

(ii) Affiliates accounted for by the equity method
The number of affiliates accounted for by the equity method
is as follows:
March 31
Affiliates ............................................
Principal companies:

2007
59

2008
71

Sumitomo Mitsui Auto Service Company, Limited
Promise Co., Ltd.
Central Finance Co., Ltd.
OMC Card, Inc.
Daiwa Securities SMBC Co. Ltd.
NIF SMBC Ventures Co., Ltd.
Daiwa SB Investments Ltd.
Sumitomo Mitsui Asset Management Company, Limited
Changes in affiliates accounted for by the equity method in

the fiscal year ended March 31, 2008 are as follows:

Twenty-five companies including Central Finance Co.,
Ltd. newly became affiliated companies accounted for by the
equity method due mainly to acquisition of shares.

Three companies including QUOQ Inc. were excluded
from the scope of affiliated companies accounted for by the
equity method because they became consolidated subsidiaries.
Ten companies including NIF Capital Management Co., Ltd.
were also excluded due mainly to merger.
(iii) Unconsolidated subsidiaries that are not accounted for

by the equity method

Two hundred and thirty-eight subsidiaries including SMLC
MAHOGANY Co., Ltd. are operators of silent partnerships
for lease transactions and their assets and profits/losses do not
belong to them substantially. Therefore, they have not been
accounted for by the equity method pursuant to Article 10
Paragraph 1 Item 2 of the Consolidated Financial Statements
Regulations.
(iv) Affiliates that are not accounted for by the equity method
Principal company:

Daiwa SB Investments (USA) Ltd.
Affiliates that are not accounted for by the equity method
are excluded from the scope of equity method because their
total amounts in terms of net income and retained earnings
are so immaterial that they do not hinder a rational judgment
of SMFG’s financial position and results of operations when
excluded from the scope of equity method.

(i) The balance sheet dates of the consolidated subsidiaries

are as follows:

2007
March 31
2
June 30 ..............................................
1
July 31...............................................
7
September 30.....................................
2
October 31.........................................
2
November 30.....................................
70
December 31 .....................................
1
January 31 .........................................
3
February 28/29 ..................................
March 31 ...........................................
93
(ii) The subsidiaries whose balance sheet dates are July 31,
September 30, November 30 and January 31 are

2008
6
2
7
2
2
122
7
6
114

consolidated after the accounts were provisionally closed as
of March 31 for the purpose of consolidation. In case of the
subsidiaries whose balance sheet dates are June 30, they
are consolidated after the accounts were provisionally
closed as of December 31 or March 31. As for the
subsidiaries whose balance sheet dates are October 31,
their financial statements are consolidated based on the
provisional financial statements closed as of January 31
or March 31, respectively. The other subsidiaries are
consolidated on the basis of their respective balance sheet
dates.

Appropriate adjustments are made for material
transactions during the periods from their respective
balance sheet dates to the consolidated balance sheet date.

(2) Trading assets/liabilities and trading profits/losses

Transactions for trading purposes (seeking gains arising from
short-term changes in interest rates, currency exchange rates,
or market prices of securities and other market related indices
or from variation among markets) are included in “Trading
assets” or “Trading liabilities” on the consolidated balance
sheets on a trade date basis. Profits and losses on trading-
purpose transactions are recognized on a trade date basis, and
recorded as “Trading profits” or “Trading losses.”

Securities and monetary claims purchased for trading
purposes are stated at the fiscal year-end market value, and
financial derivatives such as swaps, futures and options are
stated at amounts that would be settled if the transactions
were terminated at the consolidated balance sheet date.

“Trading profits” and “Trading losses” include interest

received or paid during the fiscal year. The year-on-year
valuation differences of securities and monetary claims are
also recorded in the above-mentioned accounts. As for the
derivatives, assuming that the settlement will be made in
cash, the year-on-year valuation differences are also recorded
in the above-mentioned accounts.

(3) Securities

(a) As for securities other than trading purposes, debt

securities that consolidated subsidiaries have the positive
intent and ability to hold to maturity are classified as
held-to-maturity securities and are carried at amortized
cost (straight-line method) using the moving-average
method.

Investments in unconsolidated subsidiaries and affiliates

that are not accounted for by the equity method are
carried at cost using the moving-average method.

Securities other than trading purpose securities, held-
to-maturity securities and investments in unconsolidated
subsidiaries and affiliates are classified as “other securities”
(available-for-sale securities). Stocks in other securities
that have market prices are carried at their average market
prices during the final month of the fiscal year, and bonds
and others that have market prices are carried at their
fiscal year-end market prices (cost of securities sold is
calculated using primarily the moving-average method).
Other securities with no available market prices are
carried at cost or amortized cost using the moving-average
method. Net unrealized gains (losses) on other securities,
net of income taxes, are included in “Net assets.”

SMFG 2008 77

(b) Securities included in money held in trust are carried in
the same method as for securities mentioned above.

(4) Derivative transactions

Derivative transactions, other than those classified as trading
derivatives, are carried at fair value, though some consolidated
overseas subsidiaries account for derivative transactions in
accordance with their local accounting standards.

(5) Depreciation

(a) Tangible fixed assets and lease assets

Tangible fixed assets are generally stated at cost less
accumulated depreciation. Depreciation of tangible fixed
assets and equipment owned by SMFG and SMBC is
calculated using the straight-line method and the
declining-balance method over the estimated useful lives
of the respective assets, respectively. The estimated useful
lives of major items are as follows:

Buildings: 7 to 50 years
Equipment: 2 to 20 years

Other consolidated subsidiaries depreciate their tangible
fixed assets and lease assets primarily using the straight-line
method over the estimated useful lives of the respective assets
and the straight-line method over the lease term based on the
residual value of assets at the end of the lease term,
respectively.

In accordance with the amendment of the corporate tax
laws in the fiscal year ended March 31, 2008, the tangible
fixed assets acquired on or after April 1, 2007 are depreciated
based on the depreciation method under the amended
corporate tax laws. This accounting change had no material
impact on the consolidated financial statements for the fiscal
year ended March 31, 2008.

As for the tangible fixed assets acquired before April 1,

2007, from the fiscal year ended March 31, 2008, their
residual values are depreciated over five years using the
straight-line method after the fiscal year in which the
depreciable limit is reached. This accounting change had no
material impact on the consolidated financial statements for
the fiscal year ended March 31, 2008.
(b) Intangible fixed assets
Depreciation of intangible fixed assets is calculated using the
straight-line method.

Capitalized software for internal use owned by SMFG and
its consolidated domestic subsidiaries is depreciated using the
straight-line method over its estimated useful life (basically
five years).

(6) Reserve for possible loan losses

Reserve for possible loan losses of major consolidated
subsidiaries is provided for as described below in accordance
with the internal standards for write-offs and provisions.

For claims on borrowers that have entered into bankruptcy,

special liquidation proceedings or similar legal proceedings
(“bankrupt borrowers”) or borrowers that are not legally or
formally insolvent but are regarded as substantially in the
same situation (“effectively bankrupt borrowers”), a reserve is
provided for based on the amount of claims, after the write-off
stated below, net of the expected amount of recoveries from
collateral and guarantees.

are perceived to have a high risk of falling into bankruptcy
(“potentially bankrupt borrowers”), a reserve is provided for in
the amount deemed necessary based on an overall solvency
assessment of the claims, net of the expected amount of
recoveries from collateral and guarantees.

Discounted Cash Flows (“DCF”) method is used for claims on

borrowers whose cash flows from collection of principals and
interest can be rationally estimated, and SMBC applies it to
claims on large potentially bankrupt borrowers and claims on
large borrowers requiring close monitoring that have been
classified as “Past due loans (3 months or more)” or
“Restructured loans” whose total loans from SMBC exceed a
certain amount. SMBC establishes a reserve for possible loan
losses using the DCF method for such claims in the amount of
the difference between the present value of principal and interest
(calculated using the rationally estimated cash flows discounted
at the initial contractual interest rate) and the book value.
For other claims, a reserve is provided based on the

historical loan-loss ratio.

For claims originated in certain specific overseas countries, an

additional reserve is provided for in the amount deemed
necessary based on the assessment of political and economic
conditions.

Branches and credit supervision departments assess all claims

in accordance with the internal rules for self-assessment of
assets, and the Credit Review Department, independent from
these operating sections, reviews their assessment. The reserves
are provided for based on the results of these assessments.
Reserve for possible loan losses of other consolidated

subsidiaries for general claims is provided for in the amount
deemed necessary based on the historical loan-loss ratios, and
for doubtful claims in the amount deemed uncollectible based
on assessment of each claim.

For collateralized or guaranteed claims on bankrupt
borrowers and effectively bankrupt borrowers, the amount
exceeding the estimated value of collateral and guarantees is
deemed to be uncollectible and written off against the total
outstanding amount of the claims. The amount of write-off
was ¥518,594 million ($5,176 million) and ¥490,123 million
at March 31, 2008 and 2007, respectively.

(7) Reserve for employee bonuses

Reserve for employee bonuses is provided for payment of
bonuses to employees, in the amount of estimated bonuses,
which are attributable to the respective fiscal year.

(8) Reserve for executive bonuses

Reserve for executive bonuses is provided for payment of
bonuses to executives, in the amount of estimated bonuses,
which are attributable to the respective fiscal year.

(9) Reserve for employee retirement benefits

Reserve for employee retirement benefits is provided for
payment of retirement benefits to employees, in the amount
deemed accrued at the fiscal year-end, based on the projected
retirement benefit obligation and the fair value of plan assets
at the fiscal year-end.

Unrecognized prior service cost is amortized using the straight-

line method, primarily over nine years, over the employees’
estimated average remaining service period at incurrence.

For claims on borrowers that are not currently bankrupt but

Unrecognized net actuarial gain (loss) is amortized using

SMFG 2008

the straight-line method, primarily over nine years within the
employees’ average remaining service period, commencing
from the next fiscal year of incurrence.

(10) Reserve for executive retirement benefits

Reserve for executive retirement benefits is provided for
payment of retirement benefits to directors, corporate auditors
and other executive officers, in the amount deemed accrued at
the fiscal year-end based on the internal regulations.

(11) Reserve for reimbursement of deposits

Reserve for reimbursement of deposits which were
derecognized as liabilities under certain conditions is provided
for the possible losses on the future claims of withdrawal based
on the historical reimbursement experience. Formerly,
deposits which had been derecognized as liabilities were
expensed when they were actually reimbursed. However, from
the fiscal year ended March 31, 2008, such reserve is provided
for in the estimated amount as described above in accordance
with the “Treatment for Auditing of Reserve under Special
Taxation Measures Law, Reserve under Special Laws and
Reserve for Retirement Benefits to Directors and Corporate
Auditors” (Japanese Institute of Certified Public Accountants
(“JICPA”) Audit and Assurance Practice Committee Report
No. 42) of April 13, 2007.

As a result, “Income before income taxes and minority
interests” for the fiscal year ended March 31, 2008 decreased
by ¥10,417 million ($104 million) as compared with the
former method.

(12) Reserve under special laws

Reserve under special laws is a reserve for contingent liabilities
from financial instruments transactions pursuant to Article
46-5 and Article 48-3 of the Financial Instruments and
Exchange Law. Reserve for contingent liabilities from
financial futures and securities transactions, which were
formerly recognized in accordance with Article 81 of the
Financial Futures Transactions Law and Article 51 of the
Securities and Exchange Law, respectively, are stated as
Reserve for contingent liabilities from financial instruments
transactions from the fiscal year ended March 31, 2008 in
accordance with the enforcement of the Financial Instruments
and Exchange Law on September 30, 2007.

(13) Translation of foreign currency assets and liabilities

Assets and liabilities of SMFG and SMBC denominated in
foreign currencies and accounts of SMBC overseas branches are
translated into Japanese yen mainly at the exchange rate
prevailing at the consolidated balance sheet date, with the
exception of stocks of subsidiaries and affiliates translated at
rates prevailing at the time of acquisition.

Other consolidated subsidiaries’ assets and liabilities

denominated in foreign currencies are translated into Japanese
yen at the exchange rate prevailing at their respective balance
sheet dates.
(14) Lease transactions

Financing leases of SMFG and its consolidated domestic
subsidiaries, excluding those in which the ownership of the
property is transferred to the lessee, are accounted for in the
same method as operating leases.

Standards for recognizing lease-related income on lease
transactions and income/expenses on installment sales are as

follows:
(a) Recognition of lease-related income on lease transactions

Primarily, lease-related income is recognized on a straight-
line basis over the full term of the lease, based on the
contractual amount of lease fees per month.

(b) Recognition of income and expenses on installment sales

Primarily, installment-sales-related income and
installment-sales-related expenses are recognized on a due-
date basis over the full term of the installment sales.

(15) Hedge accounting

(a) Hedging against interest rate changes

As for the hedge accounting method applied to hedging
transactions for interest rate risk arising from financial assets
and liabilities, SMBC applies deferred hedge accounting at
March 31, 2008, and deferred hedge accounting or fair value
hedge accounting at March 31, 2007.

SMBC applies deferred hedge accounting stipulated in
“Treatment for Accounting and Auditing of Application of
Accounting Standard for Financial Instruments in Banking
Industry” (JICPA Industry Audit Committee Report No.
24) to portfolio hedges on groups of large-volume, small-
value monetary claims and debts.

As for the portfolio hedges to offset market fluctuation,

SMBC assesses the effectiveness of such hedges by
classifying the hedged items (such as deposits and loans)
and the hedging instruments (such as interest rate swaps)
by their maturity. As for the portfolio hedges to fix cash
flows, SMBC assesses the effectiveness of such hedges by
verifying the correlation between the hedged items and the
hedging instruments.

As for the individual hedges, SMBC also assesses the
effectiveness of such individual hedges at March 31, 2008.
At March 31, 2007, SMBC basically applied deferred
hedge accounting, but applied fair value hedge accounting
to hedging transactions for reducing the market volatility
of bonds classified as other securities that were held for the
purpose of Asset and Liability Management.

As a result of the application of JICPA Industry Audit

Committee Report No. 24, SMBC discontinued the
application of hedge accounting or applied fair value hedge
accounting to a portion of the hedging instruments using
“macro hedge,” which had been applied in order to manage
interest rate risk arising from large-volume transactions in
loans, deposits and other interest-earning assets and
interest-bearing liabilities as a whole using derivatives
pursuant to “Temporary Treatment for Accounting and
Auditing of Application of Accounting Standard for
Financial Instruments in Banking Industry” (JICPA
Industry Audit Committee Report No. 15). The deferred
hedge losses and gains related to such a portion of hedging
instruments are charged to “Interest income” or “Interest
expenses” over a 12-year period (maximum) according to
their maturity from the fiscal year ended March 31, 2004.
Gross amounts of deferred hedge losses and gains on “macro
hedge” (before deducting tax effect) at March 31, 2008 were
¥17,608 million ($176 million) and ¥13,358 million ($133
million), respectively. The respective amounts at March 31,
2007 were ¥41,522 million and ¥29,583 million.

SMFG 2008 79

(b) Hedging against currency fluctuations

(18) Goodwill

Goodwill on Sumitomo Mitsui Finance and Leasing Company,
Limited is amortized using the straight-line method over 20
years. Goodwill on SMBC Friend Securities Co., Ltd. and
SMBC Leasing Company, Limited is amortized using the
straight-line method over 20 years and 5 years, respectively.
Goodwill on other companies is charged or credited to income
directly when incurred or benefited.

(19) Statements of cash flows

For the purposes of presenting the consolidated statements of
cash flows, cash and cash equivalents represent cash and due
from banks.

(20) New accounting standards

(a) From the fiscal year ended March 31, 2008, SMFG has

applied Article 30-2 of the “Accounting Practices for Tax
Effect Accounting on Consolidated Financial Statements”
(JICPA Accounting Practice Committee Report No. 6,
issued on March 29, 2007) to sales of investments such as
shares of subsidiaries within the group companies. As a
result, net income for the fiscal year ended March 31, 2008
decreased by ¥18,939 million ($189 million) compared
with the former method.

(b) Provisions on the scope of securities stipulated by
regulations such as the “Accounting Standards for
Financial Instruments” (ASBJ Statement No. 10) and the
“Accounting Practices for Financial Instruments” (JICPA
Accounting Practice Committee Report No. 14) were
partially revised on June 15 and July 4, 2007, respectively,
and became effective from the fiscal year ending on and
after the implementation day of the Financial Instruments
and Exchange Law. SMFG, accordingly, has applied the
revised accounting standards and practices from the fiscal
year ended March 31, 2008.

SMBC applies deferred hedge accounting stipulated in
“Treatment of Accounting and Auditing Concerning
Accounting for Foreign Currency Transactions in Banking
Industry” (JICPA Industry Audit Committee Report No.
25) to currency swap and foreign exchange swap
transactions executed for the purpose of lending or
borrowing funds in different currencies.

Pursuant to JICPA Industry Audit Committee Report
No. 25, SMBC assesses the effectiveness of currency swap
and foreign exchange swap transactions executed for the
purpose of offsetting the risk of changes in currency
exchange rates by verifying that there are foreign-currency
monetary claims and debts corresponding to the foreign-
currency positions.

In order to hedge risk arising from volatility of exchange

rates for stocks of subsidiaries and affiliates and other
securities (excluding bonds) denominated in foreign
currencies, SMBC applies deferred hedge accounting or fair
value hedge accounting, on the conditions that the hedged
securities are designated in advance and that sufficient on-
balance (actual) or off-balance (forward) liability exposure
exists to cover the cost of the hedged securities
denominated in the same foreign currencies.
(c) Transactions between consolidated subsidiaries

As for derivative transactions between consolidated
subsidiaries or internal transactions between trading
accounts and other accounts (or among internal sections),
SMBC manages the interest rate swaps and currency swaps
that are designated as hedging instruments in accordance
with the non-arbitrary and strict criteria for external
transactions stipulated in JICPA Industry Audit
Committee Report No. 24 and No. 25. Therefore, SMBC
accounts for the gains or losses that arise from interest rate
swaps and currency swaps in its earnings or defers them,
rather than eliminating them.

Certain other consolidated subsidiaries apply the
deferred hedge accounting or the special treatment for
interest rate swaps. A consolidated domestic subsidiary (a
leasing company) partly applies the accounting method
that is permitted by “Temporary Treatment for
Accounting and Auditing of Application of Accounting
Standard for Financial Instruments in Leasing Industry”
(JICPA Industry Audit Committee Report No. 19).

(16) Consumption taxes

National and local consumption taxes of SMFG and its
consolidated domestic subsidiaries are accounted for using the
tax-excluded method.

(17) Valuation of consolidated subsidiaries’ assets and liabilities

Assets and liabilities of consolidated subsidiaries including the
portion attributable to the minority stockholders are valued
for consolidation at fair value when SMFG acquires control.

SMFG 2008

3. Trading Assets
Trading assets at March 31, 2008 and 2007 consisted of the following:

March 31

Trading securities...............................................................................................
Derivatives of trading securities..........................................................................
Derivatives of securities related to trading transactions .......................................
Trading-related financial derivatives...................................................................
Other trading assets............................................................................................

4. Securities
Securities at March 31, 2008 and 2007 consisted of the following:

March 31

Japanese government bonds*1 .............................................................................
Japanese local government bonds........................................................................
Japanese corporate bonds ....................................................................................
Japanese stocks*1, 2 ..............................................................................................
Other*2 ...............................................................................................................

Millions of yen

2008

2007

¥ 230,442
3,043
10,440
2,995,314
884,370
¥4,123,611

53,288
373
2,344
2,125,214
1,096,664
¥3,277,885

Millions of yen

2008

2007

¥ 9,339,978
439,228
3,880,773
3,749,762
6,107,758
¥23,517,501

¥ 7,640,069
571,103
4,066,497
4,747,601
3,512,228
¥20,537,500

Millions of
U.S. dollars
2008

$ 2,300
31
104
29,896
8,827
$41,158

Millions of
U.S. dollars
2008

$ 93,223
4,384
38,734
37,426
60,962
$234,729

*1 Unsecured loaned securities for which borrowers have the right to sell or pledge in the amount of ¥81,071 million ($809 million) and ¥2,188 million are included in Japanese

government bonds and Japanese stocks at March 31, 2008 and 2007, respectively.

SMBC has the right to sell or pledge, some of the unsecured borrowed securities, securities under resale agreements and securities borrowed with cash collateral. Of them,

¥1,758,728 million ($17,554 million) of securities are pledged, and ¥504,363 million ($5,034 million) of securities are held in hand at March 31, 2008. The respective amounts at
March 31, 2007 were ¥2,088,859 million and ¥154,192 million.

*2 Japanese stocks and other include investments in unconsolidated subsidiaries and affiliates of ¥494,129 million ($4,932 million) and ¥430,090 million at March 31, 2008 and 2007,

respectively.

5. Loans and Bills Discounted
(1) Loans and bills discounted at March 31, 2008 and 2007 consisted of the following:

March 31

Bills discounted..................................................................................................
Loans on notes ....................................................................................................
Loans on deeds....................................................................................................
Overdrafts ..........................................................................................................

Millions of yen

2008

2007

360,859
3,241,541
50,169,292
8,373,180
¥62,144,874

454,164
3,781,841
46,485,666
7,967,649
¥58,689,322

(2) Loans and bills discounted included the following “Risk-monitored loans” stipulated in the Banking Law:

March 31

Risk-monitored loans:

Bankrupt loans*1............................................................................................
Non-accrual loans*2 .......................................................................................
Past due loans (3 months or more)*3...............................................................
Restructured loans*4 ......................................................................................

Millions of yen

2008

2007

73,472
607,226
26,625
385,336
¥1,092,661

60,715
507,289
22,018
477,362
¥1,067,386

Millions of
U.S. dollars
2008

3,602
32,354
500,741
83,573
$620,270

Millions of
U.S. dollars
2008

733
6,061
266
3,846
$10,906

*1 “Bankrupt loans” are loans, after write-off, to legally bankrupt borrowers as defined in Article 96-1-3 and 96-1-4 of the Enforcement Ordinance No. 97 of the Japanese Corporate

Tax Law (issued in 1965) and on which accrued interest income is not recognized as there is substantial doubt about the ultimate collectability of either principal or interest because
they are past due for a considerable period of time or for other reasons.

*2 “Non-accrual loans” are loans on which accrued interest income is not recognized, excluding “Bankrupt loans” and loans on which interest payments are deferred in order to support

the borrowers’ recovery from financial difficulties.

*3 “Past due loans (3 months or more)” are loans on which the principal or interest is past due for three months or more, excluding “Bankrupt loans” and “Non-accrual loans.”
*4 “Restructured loans” are loans on which terms and conditions have been amended in favor of the borrowers (e.g., reduction of the original interest rate, deferral of interest payments,
extension of principal repayments or debt forgiveness) in order to support the borrowers’ recovery from financial difficulties, excluding “Bankrupt loans,” “Non-accrual loans” and
“Past due loans (3 months or more).”

SMFG 2008 81

(3) Bills discounted are accounted for as financial transactions in accordance with JICPA Industry Audit Committee Report No. 24. SMFG’s
banking subsidiaries have rights to sell or pledge bank acceptance bought, commercial bills discounted, documentary bills and foreign
exchanges bought without restrictions. The total face value at March 31, 2008 and 2007 was ¥807,712 million ($8,062 million) and
¥915,318 million, respectively.

(4) Commitment line contracts on overdrafts and loans are agreements to lend to customers, up to a prescribed amount, as long as there is no

violation of any condition established in the contracts. The amount of unused commitments at March 31, 2008 and 2007 was ¥40,694,898
million ($406,177 million) and ¥40,947,052 million, respectively, and the amount of unused commitments whose original contract terms
are within one year or unconditionally cancelable at any time at March 31, 2008 and 2007 was ¥34,502,051 million ($344,366 million) and
¥34,769,824 million, respectively.

Since many of these commitments are expected to expire without being drawn upon, the total amount of unused commitments does not

necessarily represent actual future cash flow requirements. Many of these commitments include clauses under which SMBC and other
consolidated subsidiaries can reject an application from customers or reduce the contract amounts in the event that economic conditions
change, SMBC and other consolidated subsidiaries need to secure claims, or other events occur. In addition, SMBC and other consolidated
subsidiaries may request the customers to pledge collateral such as premises and securities at the time of the contracts, and take necessary
measures such as monitoring customers’ financial positions, revising contracts when need arises and securing claims after the contracts are
made.

6. Other Assets
Other assets at March 31, 2008 and 2007 consisted of the following:

March 31

Prepaid expenses.................................................................................................
Accrued income..................................................................................................
Deferred assets....................................................................................................
Financial derivatives ...........................................................................................
Other .................................................................................................................

7. Tangible Fixed Assets
Tangible fixed assets at March 31, 2008 and 2007 consisted of the following:

March 31

Buildings ...........................................................................................................
Land* .................................................................................................................
Construction in progress.....................................................................................
Other tangible fixed assets..................................................................................
Total ..................................................................................................................
Accumulated depreciation ..................................................................................

* Includes land revaluation excess referred to in Note 17.

8. Intangible Fixed Assets
Intangible fixed assets at March 31, 2008 and 2007 consisted of the following:

March 31

Software .............................................................................................................
Goodwill ............................................................................................................
Other intangible fixed assets...............................................................................

Millions of yen

2008

2007

39,901
296,130
1,423,253
1,492,890
1,699,412
¥4,951,587

38,293
280,115
725,893
702,211
1,603,435
¥3,349,949

Millions of yen

2008

¥235,729
463,225
3,755
117,700
¥820,411
¥557,958

2007

¥226,593
476,059
703
114,211
¥817,567
¥555,288

Millions of yen

2008

¥141,419
178,645
12,460
¥332,525

2007

¥123,151
100,850
10,894
¥234,896

Millions of
U.S. dollars
2008

398
2,956
14,205
14,901
16,962
$49,422

Millions of
U.S. dollars
2008

$2,353
4,623
37
1,175
$8,188
$5,569

Millions of
U.S. dollars
2008

$1,412
1,783
124
$3,319

SMFG 2008

9. Lease Assets
Lease assets at March 31, 2008 and 2007 were as follows:

March 31

Equipment and others ........................................................................................
Accumulated depreciation ..................................................................................

10. Assets Pledged as Collateral
Assets pledged as collateral at March 31, 2008 and 2007 consisted of the following:

March 31

Assets pledged as collateral:

Millions of yen

2008

2007

¥ 3,781,960
(2,356,863)
¥ 1,425,097

¥ 2,593,445
(1,592,098)
¥ 1,001,346

Millions of
U.S. dollars
2008

$ 37,748
(23,524)
$ 14,224

Millions of yen

2008

2007

Millions of
U.S. dollars
2008

Cash and due from banks, and Deposits with banks.......................................
Trading assets................................................................................................
Securities.......................................................................................................
Loans and bills discounted.............................................................................
Other assets (installment account receivable, etc.)..........................................

Liabilities corresponding to assets pledged as collateral:

Deposits ........................................................................................................
Call money and bills sold...............................................................................
Payables under repurchase agreements...........................................................
Payables under securities lending transactions ...............................................
Trading liabilities..........................................................................................
Borrowed money ...........................................................................................
Other liabilities.............................................................................................
Acceptances and guarantees ...........................................................................

¥ 158,679
673,261
8,334,432
952,137
3,008

25,381
1,135,000
1,714,479
5,379,076
150,283
1,447,744
14,499
140,917

¥ 104,328
202,292
3,043,253
934,423
1,946

20,588
1,335,000
128,695
1,250,450
84,532
1,112,257
23,207
167,153

$ 1,584
6,720
83,186
9,503
30

253
11,328
17,112
53,689
1,500
14,450
145
1,406

In addition to the assets presented above, the following assets were pledged as collateral for cash settlements, variation margins of futures

markets and certain other purposes at March 31, 2008 and 2007:

March 31

Cash and due from banks, and Deposits with banks ............................................
Trading assets.....................................................................................................
Securities............................................................................................................
Commercial paper and other debt purchased.......................................................
Loans and bills discounted ..................................................................................

Millions of yen

2008

7,745
601,560
3,344,984
427
888,532

2007

6,761
500,158
3,946,194
—
535,770

Millions of
U.S. dollars
2008

77
6,004
33,386
4
8,868

At March 31, 2008, other assets included surety deposits of ¥85,979 million ($858 million) and initial margins of futures markets of
¥11,546 million ($115 million). At March 31, 2007, other assets included surety deposits and intangibles of ¥94,129 million and variation
margins of futures markets of ¥3,140 million.

SMFG 2008 83

11. Deposits
Deposits at March 31, 2008 and 2007 consisted of the following:

March 31

Current deposits................................................................................................
Ordinary deposits..............................................................................................
Savings deposits ................................................................................................
Deposits at notice..............................................................................................
Time deposits....................................................................................................
Negotiable certificates of deposit.......................................................................
Other deposits...................................................................................................

12. Trading Liabilities
Trading liabilities at March 31, 2008 and 2007 consisted of the following:

March 31

Trading securities sold for short sales.................................................................
Derivatives of trading securities.........................................................................
Derivatives of securities related to trading transactions......................................
Trading-related financial derivatives..................................................................

13. Borrowed Money
Borrowed money at March 31, 2008 and 2007 consisted of the following:

Millions of yen

2008

2007

¥ 6,070,443
33,876,958
867,515
4,668,292
23,133,834
3,078,149
4,073,580
¥75,768,773

¥ 6,631,965
33,667,482
933,026
5,364,306
22,279,749
2,589,217
3,279,695
¥74,745,441

Millions of yen

2008

2007

20,046
3,881
10,196
2,637,192
¥2,671,316

16,415
288
1,975
1,924,294
¥1,942,973

Millions of
U.S. dollars
2008

$ 60,589
338,127
8,659
46,594
230,900
30,723
40,659
$756,251

Millions of
U.S. dollars
2008

200
39
102
26,322
$26,663

March 31

Bills rediscounted ...............................................
Other borrowings*2 .............................................

Millions of yen

2008

2007

—
4,279,034
¥4,279,034

—
3,214,137
¥3,214,137

Millions of
U.S. dollars
2008

$ —
42,709
$42,709

Average
interest rate*1
2008

—%

1.36
1.36%

Due

—
Jan. 2008–Perpetual

*1 Average interest rate represents the weighted average interest rate based on the balances and rates at the respective year-end of SMBC and other consolidated subsidiaries.
*2 Includes subordinated debt of ¥523,500 million ($5,225 million) and ¥559,500 million at March 31, 2008 and 2007, respectively.

The repayment schedule over the next five years on borrowed money at March 31, 2008 was as follows:

March 31

Within 1 year.......................................................................................................................
After 1 year through 2 years .................................................................................................
After 2 years through 3 years................................................................................................
After 3 years through 4 years................................................................................................
After 4 years through 5 years................................................................................................

Millions of yen
2008

¥2,716,753
345,299
297,834
179,362
183,480

Millions of U.S. dollars
2008

$ 2,711
3,446
2,973
1,790
1,831

SMFG 2008

14. Bonds
Bonds at March 31, 2008 and 2007 consisted of the following:

March 31

Issuer

Description

SMBC:
Straight bonds, payable in Yen ....................................

Straight bonds, payable in Euroyen..............................
Subordinated bonds, payable in Yen ............................
Subordinated bonds, payable in Euroyen......................
Subordinated bonds, payable in U.S. dollars ................

Subordinated bonds, payable in British pound sterling ...

Subordinated bonds, payable in Euro ...........................

Other consolidated subsidiaries:
Straight bonds, payable in Yen ....................................

Straight bonds, payable in U.S. dollars ........................

Straight bonds, payable in British pound sterling ........

Subordinated bonds, payable in Yen ............................

Subordinated bonds, payable in U.S. dollars ................

Short-term bonds.........................................................

Millions of yen*1

2008

2007

Millions of
U.S. dollars
2008

Interest rate
(%)

Due

¥1,484,978
[389,700]
26,900
599,873
813,500
297,415
($2,968,509 thousand)
2,402
(£12,000 thousand)
109,889
( 694,888 thousand)
197,436
( 1,248,489 thousand)

¥1,692,060
[405,500]
38,900
519,880
731,300
350,461
($2,967,747 thousand)
2,782
(£12,000 thousand)
109,261
( 694,207 thousand)
196,341
( 1,247,482 thousand)

$14,822

0.52–2.60

April 2008-May 2025

268
5,987
8,120
2,969

0.10–5.48686
1.71–2.62
0.92–2.99875
5.625–8.15

Mar. 2012-Feb. 2037
Jun. 2010-Dec. 2017
May 2012-Perpetual
Nov. 2011-Perpetual

1,097

1,971

6.98

4.375

Perpetual

Oct. 2014

173,044
[80,000]
1,141
($10,000 thousand)

1,811
(£8,000 thousand)
[1,811]
160,725

174,504
[64,902]
2,382
($20,000 thousand)
[1,191]
1,866
(£8,000 thousand)

[5,000]

100,190
($1,000,000 thousand)
769,100
[769,100]

¥ 4,738,408

155,694
[500]
118,090
($1,000,000 thousand)
439,600
[439,600]
¥4,533,125

1,727

0.26–3.19375

Apr. 2008-Jul. 2017

1,604

1,000

7.00

3.95

May 2009

Oct. 2008

1.45-4.95

Sep. 2008-Perpetual

8.50

Jun. 2009

7,676

0.695–1.20

Apr. 2008-Jul. 2008

$47,294

*1 Figures in ( ) are the balances in the original currency of the foreign currency denominated bonds, and figures in [ ] are the amounts to be redeemed within one year.
*2 Interest rates indicate nominal interest rates which are applied at the consolidated balance sheet dates. Therefore, they may differ from actual interest rates.

The redemption schedule over the next five years on bonds at March 31, 2008 was as follows:

March 31

Within 1 year ...................................................................................................................................
After 1 year through 2 years .............................................................................................................
After 2 years through 3 years ............................................................................................................
After 3 years through 4 years ............................................................................................................
After 4 years through 5 years ............................................................................................................

Millions of yen
2008

¥1,245,611
553,484
317,052
273,004
341,942

15. Other Liabilities
Other liabilities at March 31, 2008 and 2007 consisted of the following:

March 31

Accrued expenses................................................................................................
Unearned income ...............................................................................................
Income taxes payable ..........................................................................................
Financial derivatives ...........................................................................................
Other .................................................................................................................

Millions of yen

2008

2007

¥ 235,326
192,974
56,772
1,404,616
2,026,738
¥3,916,427

¥ 169,803
180,374
56,292
868,169
1,707,075
¥2,981,714

Millions of
U.S. dollars
2008

$12,432
5,524
3,165
2,725
3,413

Millions of
U.S. dollars
2008

$ 2,349
1,926
567
14,019
20,229
$39,090

SMFG 2008 85

16. Reserve Under Special Laws
Reserve under special laws at March 31, 2008 and 2007 consisted of the following:

March 31

Reserve for contingent liabilities from financial instruments transactions ...........
Reserve for contingent liabilities from financial futures transactions ...................
Reserve for contingent liabilities from securities transactions..............................

Millions of yen

2008

¥1,118
—
—
¥1,118

2007

¥ —
18
1,118
¥ 1,137

Millions of
U.S. dollars
2008

$11
—
—
$11

17. Land Revaluation Excess
SMBC revaluated its own land for business activities in accordance
with the “Law Concerning Land Revaluation” (the “Law”) effective
March 31, 1998 and the law concerning amendment of the Law
effective March 31, 2001. The income taxes corresponding to the
net unrealized gains are deferred and reported in “Liabilities” as
“Deferred tax liabilities for land revaluation,” and the net unrealized
gains, net of deferred taxes, are reported as “Land revaluation excess”
in “Net assets”.

Certain other consolidated subsidiaries revaluated their own land
for business activities in accordance with the Law. The income taxes
corresponding to the net unrealized gains are deferred and reported
in “Liabilities” as “Deferred tax liabilities for land revaluation” and
the net unrealized gains, net of deferred taxes, are reported as “Land
revaluation excess” in “Net assets.”

18. Minority Interests
SB Treasury Company L.L.C.*, a subsidiary of SMBC, issued
noncumulative perpetual preferred securities, totaling $1,800
million in February 1998. SB Equity Securities (Cayman), Limited,
a subsidiary of SMBC, issued noncumulative perpetual preferred
securities, totaling ¥340,000 million in February and March 1999.
Sakura Preferred Capital (Cayman) Limited, a subsidiary of SMBC,
issued noncumulative perpetual preferred securities, totaling
¥283,750 million in December 1998 and March 1999. SMFG

* See Note 38.

Date of the revaluation

SMBC:

March 31, 1998 and March 31, 2002
Certain other consolidated subsidiaries:
March 31, 1999 and March 31, 2002

Method of revaluation (stipulated in Article 3-3 of the Law)

SMBC:

Fair values were determined by applying appropriate
adjustments for land shape and timing of appraisal to the
values stipulated in Article 2-3, 2-4 or 2-5 of the
Enforcement Ordinance of the Law concerning Land
Revaluation (the Enforcement Ordinance No. 119) effective
March 31, 1998.

Certain other consolidated subsidiaries:

Fair values were determined based on the values stipulated
in Article 2-3 and 2-5 of the Enforcement Ordinance
No. 119.

Preferred Capital USD 1 Limited and SMFG Preferred Capital GBP
1 Limited, subsidiaries of SMFG, issued noncumulative perpetual
preferred securities, totaling $1,650 million and £500 million,
respectively, in December 2006. SMFG Preferred Capital JPY 1
Limited, subsidiaries of SMFG, issued noncumulative perpetual
preferred securities, totaling ¥135,000 million in February 2008.
These subsidiaries are consolidated and the preferred securities are
accounted for as minority interests.

SMFG 2008

19. Capital Stock
Capital stock consists of common stock and preferred stock. Common stock and preferred stock at March 31, 2008 and 2007 were as follows:

March 31

Common stock .........................................................................................
Preferred stock (Type 1)............................................................................
Preferred stock (Type 2)............................................................................
Preferred stock (Type 3)............................................................................
Preferred stock (Type 4)............................................................................
Preferred stock (Type 5)............................................................................
Preferred stock (Type 6)............................................................................
Preferred stock (Type 7)............................................................................
Preferred stock (Type 8)............................................................................
Preferred stock (Type 9)............................................................................
Total ........................................................................................................
* See Note 27

All of the preferred stock is noncumulative and nonparticipating
for dividend payments, and shareholders of the preferred stock are not
entitled to vote at a general meeting of shareholders except when the
proposal to pay the prescribed dividends to shareholders is not
submitted to the general meeting of shareholders or is rejected at the
general meeting of shareholders.

In the event that SMFG pays dividends, SMFG shall pay to holders

of shares of its preferred stock, in preference to the holders of its
common stock, cash dividends in the amounts as described below. If
preferred interim dividends stipulated in the Articles of Incorporation
of SMFG were paid during the relevant fiscal year, the amount of such
preferred interim dividends shall be subtracted from such amount of
annual preferred dividends. Preferred stock (Type 4) bears an annual
noncumulative dividend of ¥135,000 per share and, in the event
SMFG pays an interim dividend, holders are entitled to receive
¥67,500 in preference to common shareholders.

Preferred stock (Type 6) bears an annual noncumulative dividend of
¥88,500 per share and, in the event SMFG pays an interim dividend,
holders are entitled to receive ¥44,250 in preference to common
shareholders. Holders of preferred stock are not entitled to any further
dividends in excess of the amount as described above.

In the event of SMFG’s voluntary or involuntary liquidation,
holders of its preferred stock will be entitled, equally in rank as
among themselves and in preference over shares of its common stock,

Number of shares

2008

2007

Authorized

Issued

Authorized

Issued

15,000,000
—
—
—
50,100
167,000
70,001
167,000
115,000
115,000
15,684,101

7,733,653.77

—
—
—
50,100
—
70,001
—
—
—

7,853,754.77

15,000,000
35,000
100,000
695,000
135,000
250,000
300,000
—
—
—
16,515,000

7,733,653.77

—
—
—
50,100
—
70,001
—
—
—

7,853,754.77

to receive out of SMFG’s residual assets upon liquidation a
distribution of ¥3,000,000 per share for Type 4 and Type 6 preferred
stock. Holders of preferred stock are not entitled to any further
dividends or other participation or distribution of SMFG’s residual
assets upon SMFG’s liquidation.

SMFG may, subject to the requirements provided in the Company

Law, purchase any shares of the preferred stock then outstanding at
any time and retire such preferred stock out of distributable amounts
of SMFG. SMFG may also, subject to the requirements provided in
the Company Law, redeem all or some of preferred stock (Type 6) out
of distributable amounts of SMFG at any time on and after March 31,
2011 at a price of ¥3,000,000 per share.

Preferred stock (Type 4) is convertible to common stock at any
time through February 7, 2028. Such preferred stock is convertible at
a conversion price, which is ¥318,800 as of March 31, 2008, subject
to anti-dilution adjustment, and to downward reset if the market
price of SMFG’s common stock at the time of conversion is less than
the then-applicable conversion price. The reset is subject to a floor
price, which is ¥105,100 as of March 31, 2008 and is subject to anti-
dilution adjustment. Preferred stock (Type 4) outstanding on the last
day of the applicable conversion period will be mandatorily converted
into shares of its common stock on the immediately following day.

Preferred stock (Type 6) is non-convertible.

SMFG 2008 87

20. Fees and Commissions
Fees and commissions for the fiscal years ended March 31, 2008 and 2007 consisted of the following:

Year ended March 31

Fees and commissions (income):

Deposits and loans.........................................................................................
Remittances and transfers..............................................................................
Securities-related business .............................................................................
Agency..........................................................................................................
Safe deposits ..................................................................................................
Guarantees ....................................................................................................
Credit card business.......................................................................................
Investment trusts ..........................................................................................
Other ............................................................................................................

Fees and commissions (expenses):

Remittances and transfers..............................................................................
Other ............................................................................................................

Millions of yen

2008

2007

Millions of
U.S. dollars
2008

¥ 73,822
133,645
35,118
16,028
7,144
47,117
128,575
72,376
190,455
¥704,283

¥ 31,612
60,677
¥ 92,289

¥ 65,698
132,836
48,650
16,581
7,322
45,961
117,197
77,971
193,778
¥705,998

¥ 27,200
69,612
¥ 96,812

$ 737
1,334
351
160
71
470
1,283
723
1,901
$7,030

$ 315
606
$ 921

21. Trading Income
Trading income for the fiscal years ended March 31, 2008 and 2007 consisted of the following:

Year ended March 31

Trading profits:

Gains on trading securities ............................................................................
Gains on securities related to trading transactions .........................................
Gains on trading-related financial derivatives ................................................
Other ............................................................................................................

Trading losses:

Losses on securities related to trading transactions .........................................

Millions of yen

2008

2007

Millions of
U.S. dollars
2008

¥ 21,406
2,934
438,365
6,865
¥469,571

¥ 15,109
—
109,208
3,244
¥127,561

¥
¥

—
—

¥
¥

1,936
1,936

22. Other Operating Income
Other operating income for the fiscal years ended March 31, 2008 and 2007 consisted of the following:

Year ended March 31

Gains on sale of bonds ........................................................................................
Gains on redemption of bonds ............................................................................
Lease-related income...........................................................................................
Gains on foreign exchange transactions...............................................................
Gains on financial derivatives .............................................................................
Other .................................................................................................................

Millions of yen

2008

2007

¥ 108,350
88
893,448
—
1,099
209,648
¥1,212,635

28,180
1,119
744,881
56,800
—
172,649
¥1,003,632

SMFG 2008

$ 214
29
4,375
69
$4,687

$ —
$ —

Millions of
U.S. dollars
2008

$ 1,081
1
8,918
—
11
2,092
$12,103

23. Other Operating Expenses
Other operating expenses for the fiscal years ended March 31, 2008 and 2007 consisted of the following:

Year ended March 31

Losses on sale of bonds........................................................................................
Losses on redemption of bonds............................................................................
Losses on devaluation of bonds............................................................................
Bond issuance costs ............................................................................................
Lease-related expenses.........................................................................................
Losses on foreign exchange transactions ..............................................................
Losses on financial derivatives.............................................................................
Other .................................................................................................................

Millions of yen

2008

2007

29,380
35,860
67,045
756
794,468
254,927
—
209,651
¥1,392,089

¥ 139,302
3,534
—
799
674,662
—
22,809
163,262
¥1,004,370

24. Other Income
Other income for the fiscal years ended March 31, 2008 and 2007 consisted of the following:

Year ended March 31

Gains on sale of stocks and other securities .........................................................
Gains on money held in trust .............................................................................
Gains on disposal of fixed assets..........................................................................
Collection of written-off claims ..........................................................................
Gains on change in equity due to mergers of subsidiaries....................................
Gains on return of securities from retirement benefits trust ................................
Gains on sale of a subsidiary’s shares and change in equity of the subsidiary........
Other .................................................................................................................

Millions of yen

2008

¥ 61,509
250
10,988
1,355
103,133
—
—
26,108
¥203,346

2007

¥ 62,793
0
4,730
1,236
—
36,330
4,226
18,700
¥128,017

25. Other Expenses
Other expenses for the fiscal years ended March 31, 2008 and 2007 consisted of the following:

Year ended March 31

Write-off of loans ...............................................................................................
Losses on sale of stocks and other securities.........................................................
Losses on devaluation of stocks and other securities.............................................
Losses on money held in trust .............................................................................
Losses on sale of delinquent loans .......................................................................
Equity in losses of affiliates.................................................................................
Losses on disposal of fixed assets .........................................................................
Losses on impairment of fixed assets* .................................................................
Other .................................................................................................................

Millions of yen

2008

¥141,750
5,737
62,835
23
35,300
41,760
12,538
5,161
35,355
¥340,463

2007

¥ 81,415
1,499
16,562
—
39,302
104,170
7,798
30,548
33,876
¥315,175

Millions of
U.S. dollars
2008

293
358
669
8
7,930
2,544
—
2,093
$13,895

Millions of
U.S. dollars
2008

$ 614
2
110
14
1,029
—
—
261
$2,030

Millions of
U.S. dollars
2008

$1,415
57
627
0
352
417
125
52
353
$3,398

SMFG 2008 89

* Losses on impairment of fixes assets consisted of the following:

Year ended
March 31

Area

Tokyo metropolitan area ...................................

Kinki area.........................................................

Other................................................................

Purpose of use
2008

Branches (4 branches)
Idle assets (27 items)
Other (2 items)
Branches (5 branches)
Idle assets (18 items)
Branches (9 branches)
Idle assets (13 items)

Type

Millions of yen

2008

2007

Millions of
U.S. dollars
2008

Land and premises, etc.

41
1,196
69
298
3,086
17
451

¥25,799
1,782
—
839
443
—
1,683

$ 0
12
1
3
31
0
5

At the consolidated subsidiary SMBC, every branch, which
continuously manages and determines income and expenses, is the
smallest unit of the asset group for recognition and measurement of
impairment loss. Assets such as corporate headquarters facilities,
training facilities, data and system centers, and health and recreational
facilities which do not produce cash flows that can be attributed to
individual assets are treated as common-use assets. As for idle assets,
impairment loss is measured individually. At other consolidated
subsidiaries, a branch is generally the smallest asset grouping unit.
SMBC and other subsidiaries reduced the carrying amounts of

long-lived assets, of which investments are not expected to be fully
recovered-SMBC reduced the carrying amounts of idle assets and
other consolidated subsidiaries reduced the carrying amounts of
long-lived assets of their branches and idle assets-to their recoverable
amounts, and recognized the losses as “losses on impairment of fixed
assets,” which is included in “Other expenses.” The recoverable
amount is calculated using net realizable value which is basically
determined by subtracting the expected disposal cost from the
appraisal value based on the Real Estate Appraisal Standard.

26. Income Taxes

(1) Significant components of deferred tax assets and liabilities at March 31, 2008 and 2007 were as follows:

March 31

Deferred tax assets:

Net operating loss carryforwards .........................................................
Write-off of securities..........................................................................
Reserve for possible loan losses ............................................................
Write-off of loans ................................................................................
Reserve for employee retirement benefits.............................................
Deferred gain or loss on hedges ...........................................................
Depreciation........................................................................................
Other ..................................................................................................
Subtotal ..............................................................................................
Valuation allowance ............................................................................
Total deferred tax assets.......................................................................

Deferred tax liabilities:

Net unrealized gains on other securities...............................................
Leveraged lease ....................................................................................
Gains on securities contributed to employee retirement benefits trust...
Securities returned from employee retirement benefits trust ................
Undistributed earnings of subsidiaries.................................................
Other ..................................................................................................
Total deferred tax liabilities.................................................................
Net deferred tax assets..............................................................................

Millions of yen

2008

2007

Millions of
U.S. dollars
2008

¥ 863,604
332,355
212,043
104,729
66,012
51,455
8,730
127,474
1,766,405
(491,685)
1,274,720

(191,661)
(62,256)
(42,263)
(20,282)
(12,506)
(12,268)
(341,238)
¥ 933,481

¥1,170,595
284,084
191,150
101,611
75,582
60,247
9,256
120,304
2,012,833
(457,174)
1,555,659

(569,723)
(60,724)
(42,408)
(20,312)
(10,600)
(15,619)
(719,388)
¥ 836,270

$ 8,620
3,317
2,117
1,045
659
514
87
1,272
17,631
(4,908)
12,723

(1,913)
(621)
(422)
(202)
(125)
(123)
(3,406)
$ 9,317

SMFG 2008

(2) SMFG and its domestic consolidated subsidiaries are subject
to Japanese national and local income taxes, which, in the
aggregate, would result in an effective statutory tax rate of
approximately 40.69% for the years ended March 31, 2008

and 2007. A reconciliation of the effective income tax rate
reflected in the accompanying consolidated statements of
income to the statutory tax rate for the years ended March 31,
2008 and 2007 was as follows:

Statutory tax rate ..........................................................................................................................
Valuation allowance ..............................................................................................................
Equity in losses of affiliates....................................................................................................
Gains on changes in equity....................................................................................................
Unrealized gains....................................................................................................................
Other ....................................................................................................................................
Effective income tax rate ...............................................................................................................

27. Changes in Net Assets

(1) Type and number of shares issued and treasury shares are as follows:

2008

40.69%
2.10
1.83
(4.52)
3.04
(1.54)
41.60%

2007

40.69%
(6.94)
5.25
—
—
(1.00)
38.00%

Year ended March 31, 2008

Shares issued

Number of shares

March 31,
2007

Increase

Decrease

March 31,
2008

Common stock ............................................................................
Preferred stock (1st series Type 4) ...............................................
Preferred stock (2nd series Type 4) ..............................................
Preferred stock (3rd series Type 4)...............................................
Preferred stock (4th series Type 4)...............................................
Preferred stock (5th series Type 4)...............................................
Preferred stock (6th series Type 4)...............................................
Preferred stock (7th series Type 4)...............................................
Preferred stock (8th series Type 4)...............................................
Preferred stock (9th series Type 4)...............................................
Preferred stock (10th series Type 4).............................................
Preferred stock (11th series Type 4).............................................
Preferred stock (12th series Type 4).............................................
Preferred stock (1st series Type 6) ...............................................
Total ......................................................................................

7,733,653.77
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
70,001
7,853,754.77

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

7,733,653.77
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
70,001
7,853,754.77

Treasury shares

Common stock ............................................................................
Total ......................................................................................

168,630.95
168,630.95

895.01
895.01

528.55
528.55

168,997.41
168,997.41

*1 Increase in number of treasury common shares:
● 895.01 shares due to purchase of fractional shares
*2 Decrease in number of treasury common shares:

● 234.55 shares due to sale of fractional shares and delivery of shares in connection with exercising of stock options
● 294 shares due to sale of shares of SMFG’s common stock owned by subsidiaries

SMFG 2008 91

Year ended March 31, 2007

Shares issued

Common stock ............................................................................
Preferred stock (Type 1) ..............................................................
Preferred stock (Type 2) ..............................................................
Preferred stock (Type 3) ..............................................................
Preferred stock (1st series Type 4) ...............................................
Preferred stock (2nd series Type 4) ..............................................
Preferred stock (3rd series Type 4)...............................................
Preferred stock (4th series Type 4)...............................................
Preferred stock (5th series Type 4)...............................................
Preferred stock (6th series Type 4)...............................................
Preferred stock (7th series Type 4)...............................................
Preferred stock (8th series Type 4)...............................................
Preferred stock (9th series Type 4)...............................................
Preferred stock (10th series Type 4).............................................
Preferred stock (11th series Type 4).............................................
Preferred stock (12th series Type 4).............................................
Preferred stock (1st series Type 6) ...............................................
Total ......................................................................................

Treasury shares

*1 Increase in number of common shares issued:

Number of shares

March 31,
2006

Increase

Decrease

March 31,
2007

7,424,172.77
35,000
100,000
695,000
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
70,001
8,374,273.77

6,307.15
—
—
—
6,307.15

*1
309,481
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
309,481

170,936.41
35,000
*3
100,000
*4
695,000
1,000,936.41

—
35,000
100,000
695,000
—
—
—
—
—
—
—
—
—
—
—
—
—
830,000

8,612.61
35,000
100,000
695,000
838,612.61

7,733,653.77
—
—
—
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
70,001
7,853,754.77

168,630.95
—
—
—
168,630.95

● 249,015 shares due to issuance of new shares related to the share exchange with SMBC Friend Securities Co., Ltd. on September 1, 2006
● 60,466 shares due to exercising of rights to request acquisition of common shares with respect to preferred stock (Type 3) on September 29, 2006

*2 Increase in number of treasury shares of preferred stock (Type 1):

● 35,000 shares due to acquisition of own shares on May 17, 2006 pursuant to the resolution of the ordinary general meeting of shareholders held on June 29, 2005
Decrease in number of shares issued and treasury shares of preferred stock (Type 1):
● 35,000 shares due to retirement of treasury shares on May 17, 2006
*3 Increase in number of treasury shares of preferred stock (Type 2):

● 100,000 shares due to acquisition of own shares on May 17 and September 6, 2006 pursuant to the resolution of the ordinary general meetings of shareholders held on

June 29, 2005 and June 29, 2006

Decrease in number of shares issued and treasury shares of preferred stock (Type 2):
● 100,000 shares due to retirement of treasury shares on May 17 and September 6, 2006

*4 Increase in number of treasury shares of preferred stock (Type 3):

● 645,000 shares due to acquisition of own shares on September 29 and October 11, 2006 pursuant to the resolution of the ordinary general meeting of shareholders held on

June 29, 2006

● 50,000 shares due to acquisition of own shares on September 29, 2006 as a result of exercising of rights to request acquisition of common shares
Decrease in number of shares issued and treasury shares of preferred stock (Type 3):
● 695,000 shares due to retirement of treasury shares on September 29 and October 11, 2006

*5 Increase in number of treasury common shares:

● 60,466 shares due to acquisition of own shares on October 17, 2006 pursuant to the resolution of the ordinary general meeting of shareholders held on June 29, 2006
● 1,265.41 shares due to purchase of fractional shares
● 109,205 shares owned by consolidated subsidiaries and affiliates in connection with the share exchange with SMBC Friend Securities Co., Ltd.
Decrease in number of treasury common shares:
● 182.61 shares due to sale of fractional shares and delivery of shares in connection with exercising of stock options
● 8,430 shares due to sale of shares of SMFG’s common stock owned by subsidiaries and affiliates

SMFG 2008

(2) Information on stock acquisition rights is as follows:

Year ended March 31, 2008

SMFG ...................................
Consolidated subsidiaries ......
Total.....................................

Detail of stock
acquisition rights

Type of
shares

March 31,
2007

Stock options
—

—
—

Year ended March 31, 2007

SMFG ...................................
Consolidated subsidiaries ......
Total.....................................

Detail of stock
acquisition rights

Type of
shares

March 31,
2006

Stock options
—

—
—

Number of shares

Increase

Decrease

—
—

Number of shares

Increase

Decrease

—
—

March 31,
2008

—
—

March 31,
2007

—
—

Millions of yen
March 31,
2008

¥ —
43
¥43

Millions of yen
March 31,
2007

¥ —
14
¥14

Millions of
U.S. dollars
March 31,
2008

$ —
0
$ 0
Millions of
U.S. dollars
March 31,
2007

$ —
0
$ 0

(3) Information on dividends is as follows:

(a) Dividends paid in the fiscal year ended March 31, 2007

Type of shares

Common stock ..................................................................
Preferred stock (Type 1) ....................................................
Preferred stock (Type 2) ....................................................
Preferred stock (Type 3) ....................................................
Preferred stock (1st series Type 4) .....................................
Preferred stock (2nd series Type 4) ....................................
Preferred stock (3rd series Type 4).....................................
Preferred stock (4th series Type 4).....................................
Preferred stock (5th series Type 4).....................................
Preferred stock (6th series Type 4).....................................
Preferred stock (7th series Type 4).....................................
Preferred stock (8th series Type 4).....................................
Preferred stock (9th series Type 4).....................................
Preferred stock (10th series Type 4)...................................
Preferred stock (11th series Type 4)...................................
Preferred stock (12th series Type 4)...................................
Preferred stock (1st series Type 6) .....................................

Millions of yen, except per share amount

Aggregate amount
of dividends

Cash dividends
per share

Record date

Effective date

¥22,253
367
2,850
9,521
563
563
563
563
563
563
563
563
563
563
563
563
6,195

3,000
10,500
28,500
13,700
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
88,500

March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006

June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006
June 29, 2006

Date of resolution: Ordinary general meeting of shareholders held on June 29, 2006

(b) Dividends paid in the fiscal year ended March 31, 2008

Type of shares

Common stock..................................................................
Preferred stock (1st series Type 4) .....................................
Preferred stock (2nd series Type 4)....................................
Preferred stock (3rd series Type 4) ....................................
Preferred stock (4th series Type 4) ....................................
Preferred stock (5th series Type 4) ....................................
Preferred stock (6th series Type 4) ....................................
Preferred stock (7th series Type 4) ....................................
Preferred stock (8th series Type 4) ....................................
Preferred stock (9th series Type 4) ....................................
Preferred stock (10th series Type 4) ..................................
Preferred stock (11th series Type 4) ..................................
Preferred stock (12th series Type 4) ..................................
Preferred stock (1st series Type 6) .....................................

Millions of yen, except per share amount

Aggregate amount
of dividends

Cash dividends
per share

Record date

Effective date

¥53,660
563
563
563
563
563
563
563
563
563
563
563
563
6,195

7,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
135,000
88,500

March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007

June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007
June 28, 2007

Date of resolution: Ordinary general meeting of shareholders held on June 28, 2007

SMFG 2008 93

Type of shares

Millions of yen, except per share amount

Aggregate amount
of dividends

Cash dividends
per share

¥38,326
281
281
281
281
281
281
281
281
281
281
281
281
3,097

¥ 5,000
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
44,250

Record date

Effective date

September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007
September 30, 2007

December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007
December 7, 2007

Date of resolution: Meeting of the Board of Directors held on November 19, 2007

Type of shares

Common stock .....................................
Preferred stock (1st series Type 4) ........
Preferred stock (2nd series Type 4) .......
Preferred stock (3rd series Type 4)........
Preferred stock (4th series Type 4)........
Preferred stock (5th series Type 4)........
Preferred stock (6th series Type 4)........
Preferred stock (7th series Type 4)........
Preferred stock (8th series Type 4)........
Preferred stock (9th series Type 4)........
Preferred stock (10th series Type 4)......
Preferred stock (11th series Type 4)......
Preferred stock (12th series Type 4)......
Preferred stock (1st series Type 6) ........

Aggregate amount
of dividends

Millions of yen, except per share amount
Cash dividends
per share

Source
of dividends

Record date

¥53,655
281
281
281
281
281
281
281
281
281
281
281
281
3,097

Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings
Retained earnings

¥ 7,000
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
67,500
44,250

March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008
March 31, 2008

Effective date

June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008
June 27, 2008

Date of resolution: Ordinary general meeting of shareholders held on June 27, 2008

28. Cash Flows

(1) Fiscal year ended March 31, 2008

(a) QUOQ Inc. and two other companies became consolidated subsidiaries of SMFG due to increases in the voting rights in the fiscal

year ended March 31, 2008. Their major assets and liabilities are as follows:

Assets.........................................................................................................................
Other assets...........................................................................................................
Customers’ liabilities for acceptances and guarantees .............................................

Liabilities ...................................................................................................................
Borrowed money ...................................................................................................
Acceptances and guarantees...................................................................................

Millions of yen

Millions of U.S. dollars

¥1,504,288
548,428
891,593

¥1,471,831
436,628
891,593

$15,014
5,474
8,899

$14,690
4,358
8,899

SMFG 2008

(b) The major assets and liabilities which were acquired due to a merger between SMBC Leasing Company, Limited and Sumisho Lease

Co., Ltd. are as follows:

Assets..........................................................................................................................
Lease assets .............................................................................................................
Loans and bills discounted......................................................................................

Liabilities ....................................................................................................................
Borrowed money ....................................................................................................
Short-term bonds ...................................................................................................

Millions of yen

Millions of U.S. dollars

¥1,392,490
632,224
329,069

¥1,249,703
571,741
393,000

$13,898
6,310
3,284

$12,473
5,707
3,923

(c) SMBC Auto Leasing Company, Limited and one other company were excluded from the scope of consolidation due to a merger with

Sumisho Auto Leasing Corporation in the fiscal year ended March 31, 2008. Their major assets and liabilities are as follows:

Millions of yen

Millions of U.S. dollars

¥ 305,751
221,725

¥ 289,379
144,561
106,000

$ 3,052
2,213

$ 2,888
1,443
1,058

(2) Fiscal year ended March 31, 2007

Capital surplus increased by ¥221,365 million due to the fact that SMFG made SMBC Friend Securities into a wholly-owned subsidiary
through a share exchange and delivered common stocks in the fiscal year ended March 31, 2007.

29. Employee Retirement Benefits

(1) Outline of employee retirement benefits

Consolidated subsidiaries in Japan have contributory funded
defined benefit pension plans such as employee pension plans,
qualified pension plans and lump-sum severance indemnity
plans. A consolidated subsidiary in Japan adopts the defined-
contribution pension plan. Certain domestic consolidated
subsidiaries have a general type of employee pension plans.

They may grant additional benefits in cases where certain
requirements are met when employees retire.

Some overseas consolidated subsidiaries adopt defined-
benefit pension plans and defined-contribution pension plans.
SMBC and some consolidated subsidiaries in Japan
contributed some of their marketable equity securities to
employee retirement benefits trust.

(2) Projected benefit obligation

March 31

Projected benefit obligation
Plan assets
Unfunded projected benefit obligation
Unrecognized net actuarial gain or loss
Unrecognized prior service cost
Net amount recorded on the consolidated

balance sheet

Prepaid pension cost
Reserve for employee retirement benefits

(A) ..........................................
(B)...........................................
(C)=(A)+(B) ...........................
(D) ..........................................
(E) ...........................................

(F)=(C)+(D)+(E)......................
(G) ..........................................
(F) – (G) ...................................

Millions of yen

2008

¥ (919,082)
975,920
56,838
153,949
(37,118)

173,669
212,370
¥ (38,701)

2007

¥ (910,139)
1,186,060
275,921
(83,905)
(48,257)

143,757
178,182
(34,424)

Millions of
U.S. dollars
2008

$ (9,174)
9,741
567
1,537
(370)

1,734
2,120
$ (386)

Notes : 1. Some consolidated subsidiaries adopt the simple method in calculating the projected benefit obligation.

2. Plan assets related to the general type of the welfare pension plan at March 31, 2007 amounted to ¥19,648 million, and were not included in the “Plan assets”

shown above.

SMFG 2008 95

(3) Pension expenses

Year ended March 31

Service cost...............................................................................................
Interest cost on projected benefit obligation .............................................
Expected return on plan assets ..................................................................
Amortization of unrecognized net actuarial gain or loss ............................
Amortization of unrecognized prior service cost........................................
Other (nonrecurring additional retirement allowance paid and other) .......
Pension expenses ......................................................................................
Gains on return of employee retirement benefits trust ..............................
Total ........................................................................................................

Millions of yen

2008

¥ 19,947
22,414
(32,407)
4,546
(11,182)
2,544
¥ 5,863
—
¥ 5,863

2007

¥ 20,082
22,325
(30,184)
3,305
(11,175)
3,254
¥ 7,607
(36,330)
¥(28,722)

Millions of
U.S. dollars
2008

$ 199
224
(323)
45
(112)
26
$ 59
—
$ 59

Notes: 1. Pension expenses of consolidated subsidiaries which adopt the simple method are included in “Service cost.”

2. Premium paid to defined-contribution pension is included in “Other.”

(4) Assumptions

The principal assumptions used in determining benefit obligation and pension expenses at or for the fiscal years ended March 31, 2008
and 2007 were as follows:

Year ended March 31

Discount rate.........................................................................................
Expected rate of return on plan assets ....................................................

2008

1.4% to 2.5%
0% to 4.5%

2007

1.4% to 2.5%
0% to 4.5%

Estimated amounts of retirement benefits are allocated to each period by the straight-line method.
Unrecognized prior service cost is amortized using the straight-line method within the employees’ average remaining service period at

incurrence, over mainly 9 years for the fiscal years ended March 31, 2008 and 2007.

Unrecognized net actuarial gain or loss is amortized using the straight-line method within the employees’ average remaining service

period, commencing from the next fiscal year of incurrence, over mainly 9 years for the fiscal years ended March 31, 2008 and 2007.

30. Lease Transactions

(1) Financing leases

A summary of assumed amounts of acquisition cost, accumulated depreciation and net book value for financing leases without transfer of
ownership at March 31, 2008 and 2007 was as follows:
(a) Lessee side

Millions of yen

March 31

Equipment....
Other ............
Total.............

Acquisition
cost

¥14,741
483
¥15,224

2008
Accumulated
depreciation

¥6,544
313
¥6,858

Net book
value

¥8,196
170
¥8,366

Acquisition
cost

¥11,843
721
¥12,564

2007
Accumulated
depreciation

¥5,188
423
¥5,612

Net book
value

¥6,654
298
¥6,952

Millions of U.S. dollars
2008
Accumulated
depreciation

Net book
value

Acquisition
cost

$147
5
$152

$65
3
$68

$82
2
$84

Future minimum lease payments excluding interest at March 31, 2008 and 2007 were as follows:

March 31

Due within one year .................................................................................
Due after one year.....................................................................................

Millions of yen

2008

¥4,007
4,791
¥8,798

2007

¥3,006
4,205
¥7,212

Millions of
U.S. dollars
2008

$40
48
$88

Total lease expenses for the years ended March 31, 2008 and

2007 were ¥3,914 million ($39 million) and ¥3,046 million,
respectively. Assumed depreciation for the years ended March
31, 2008 and 2007 amounted to ¥3,702 million ($37 million)
and ¥2,690 million, respectively. Assumed depreciation is
calculated using the straight-line method over the lease term
of the respective assets without residual values. The difference

between the minimum lease payments and the acquisition
costs of the lease assets represents interest expenses. The
allocation of such interest expenses over the lease term is
calculated using the effective interest method. Interest
expenses for the years ended March 31, 2008 and 2007
amounted to ¥177 million ($2 million) and ¥179 million,
respectively.

SMFG 2008

(b) Lessor side

Millions of yen

March 31

Acquisition
cost

2008
Accumulated
depreciation

Net book
value

Acquisition
cost

2007
Accumulated
depreciation

Equipment....
Other ............
Total.............

¥3,111,499
557,804
¥3,669,303

¥2,021,324
322,065
¥2,343,389

¥1,090,174
235,739
¥1,325,914

¥1,812,599
692,551
¥2,505,150

¥1,186,663
384,134
¥1,570,797

Net book
value

¥625,936
308,416
¥934,353

Future lease payments receivable excluding interest at March 31, 2008 and 2007 were as follows:

Millions of U.S. dollars
2008
Accumulated
depreciation

Acquisition
cost

Net book
value

$31,056
5,567
$36,623

$20,175
3,214
$23,389

$10,881
2,353
$13,234

March 31

At March 31, 2008 and 2007, future lease payments

receivable shown above included subleases of ¥6,693 million
($67 million) and ¥5,057 million (due within one year:
¥3,331 million ($33 million) and ¥2,214 million) on the
lessor side, respectively. The amount on the lessee side was
almost the same and was included in the future minimum
lease payments shown in (a).

Total lease income for the years ended March 31, 2008 and

2007 was ¥478,069 million ($4,772 million) and ¥403,316
million, respectively. Depreciation for the years ended March

Millions of yen

2008

¥ 446,616
928,716
¥1,375,333

2007

¥307,152
629,981
¥937,133

Millions of
U.S. dollars
2008

$ 4,458
9,269
$13,727

31, 2008 and 2007 amounted to ¥392,325 million ($3,916
million) and ¥324,614 million, respectively. Interest income
represents the difference between the sum of the lease
payments receivable and estimated salvage values, and the
acquisition costs of the lease assets. The allocation of such
interest income over the lease term is calculated using the
effective interest method. Interest income for the years ended
March 31, 2008 and 2007 amounted to ¥68,576 million
($684 million) and ¥52,856 million, respectively.

(2) Operating leases

(a) Lessee side
Future minimum lease payments at March 31, 2008 and 2007 were as follows:

March 31

(b) Lessor side
Future lease payments receivable at March 31, 2008 and 2007 were as follows:

March 31

Millions of yen

2008

¥14,287
63,723
¥78,010

2007

¥14,164
55,124
¥69,288

Millions of yen

2008

¥ 12,848
42,130
¥ 54,978

2007

¥18,861
53,625
¥72,487

Millions of
U.S. dollars
2008

$ 143
636
$ 779

Millions of
U.S. dollars
2008

$128
421
$549

Future lease payments receivable at March 31, 2008 and 2007 amounting to ¥36,396 million ($363 million) and ¥47,816 million,

respectively, on the lessor side referred to in (1) and (2) above were pledged as collateral for borrowings.

SMFG 2008 97

31. Market Value of Marketable Securities and Money Held in Trust

(1) Securities

The amounts shown in the following tables include trading securities and short-term bonds classified as “Trading assets,” negotiable
certificates of deposit bought classified as “Deposits with banks,” and beneficiary claims on loan trusts classified as “Commercial paper
and other debt purchased,” in addition to “Securities” stated in the consolidated balance sheets.

(a) Securities classified as trading purposes

March 31

Millions of yen

2008

2007

Consolidated balance sheet amount...........................................................
Valuation gains included in the earnings for the fiscal year .......................

¥1,114,812
313

¥1,149,952
438

(b) Bonds classified as held-to-maturity with market value

March 31

Japanese government bonds .................................................
Japanese local government bonds .........................................
Japanese corporate bonds .....................................................
Other...................................................................................
Total....................................................................................

Consolidated
balance sheet
amount

¥ 614,281
97,311
390,070
9,178
¥1,110,841

Market value

¥ 625,028
98,903
394,679
8,985
¥1,127,597

Millions of yen
2008

Net unrealized
gains (losses)

¥10,747
1,591
4,608
(192)
¥16,755

Millions of yen
2007

Unrealized
gains

¥12,035
1,591
4,752
—
¥18,379

March 31

Consolidated
balance sheet
amount

¥ 629,762
97,102
380,142
5,445
¥1,112,452

Market value

¥ 621,717
95,307
376,735
5,626
¥1,099,387

Net unrealized
gains (losses)

Unrealized
gains

¥ (8,045)
(1,794)
(3,406)
180
¥ (13,065)

¥ 20
—
—
180
¥ 200

Millions of
U.S. dollars
2008

$11,127
3

Unrealized
losses

¥1,287
—
143
192
¥1,623

Unrealized
losses

¥ 8,065
1,794
3,406
—
¥13,266

March 31

Note: Market value is calculated using market prices at the fiscal year-end.

Millions of U.S. dollars
2008

Consolidated
balance sheet
amount

$ 6,131
971
3,893
92
$11,087

Market value

$ 6,238
987
3,939
90
$11,254

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
losses

$107
16
46
(2)
$167

$120
16
47
—
$183

$13
—
1
2
$16

SMFG 2008

Millions of yen
2008

March 31

Stocks ..................................................................................
Bonds ..................................................................................
Japanese government bonds ............................................
Japanese local government bonds ....................................
Japanese corporate bonds ................................................
Other...................................................................................
Total....................................................................................

Acquisition
cost

Consolidated
balance sheet
amount

¥ 1,954,723
9,864,246
8,858,202
342,677
663,366
5,295,371
¥17,114,341

¥ 2,890,952
9,731,353
8,725,687
341,916
663,750
5,237,455
¥17,859,762

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
losses

¥936,228
(132,892)
(132,515)
(760)
383
(57,915)
¥745,420

¥ 999,414
18,645
16,924
308
1,412
24,469
¥1,042,530

¥ 63,186
151,537
149,439
1,069
1,028
82,385
¥297,109

March 31

Millions of yen
2007

Acquisition
cost

Consolidated
balance sheet
amount

Net unrealized
gains (losses)

Unrealized
gains

¥ 1,953,767
8,481,507
7,150,792
482,555
848,158
2,754,061
¥13,189,336

¥ 3,926,414
8,324,140
7,010,306
474,001
839,831
2,763,949
¥15,014,504

¥1,972,647
(157,367)
(140,485)
(8,554)
(8,327)
9,888
¥1,825,168

¥1,987,337
1,805
1,182
119
503
42,977
¥2,032,120

Unrealized
losses

¥ 14,689
159,173
141,668
8,674
8,830
33,089
¥206,952

March 31

Millions of U.S. dollars
2008

Acquisition
cost

$ 19,510
98,456
88,415
3,420
6,621
52,853
$170,819

Consolidated
balance sheet
amount

$ 28,854
97,130
87,092
3,413
6,625
52,275
$178,259

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
losses

$9,344
(1,326)
(1,323)
(7)
4
(578)
$7,440

$ 9,975
186
169
3
14
244
$10,405

$ 631
1,512
1,492
10
10
822
$2,965

Notes:

1. Consolidated balance sheet amount is calculated as follows:

Stocks
Bonds and other

: Average market prices during one month before the fiscal year-end
: Market prices at the fiscal year-end

2. Other securities with market value are considered as impaired if the market value declines materially below the acquisition cost and such decline is not considered as
recoverable. In such a case, the market value is recognized as the consolidated balance sheet amount and the amount of the write-down is accounted for as a valuation
loss for the fiscal year. Valuation losses for the fiscal years ended March 31, 2008 and 2007 were ¥96,455 million ($963 million) and ¥7,296 million, respectively.
The rule for determining “material decline” is as follows and is based on the classification of the issuing company under self-assessment of assets.

Bankrupt/ Effectively bankrupt/ Potentially bankrupt issuers
Issuers requiring caution
Normal issuers
Bankrupt issuers
Effectively bankrupt issuers
Potentially bankrupt issuers
bankruptcy.
Issuers requiring caution
Normal issuers

: Market value is lower than acquisition cost.
: Market value is 30% or more lower than acquisition cost.
: Market value is 50% or more lower than acquisition cost.
: Issuers that are legally bankrupt or formally declared bankrupt.
: Issuers that are not legally bankrupt but regarded as substantially bankrupt.
: Issuers that are not bankrupt now, but are perceived to have a high risk of falling into

: Issuers that are identified for close monitoring.
: Issuers other than the above four categories of issuers.

SMFG 2008 99

(d) Held-to-maturity bonds sold during the years ended March 31, 2008 and 2007

There are no corresponding transactions.

(e) Other securities sold during the year

Year ended March 31

Millions of yen

2008

2007

Sales amount ............................................................................................
Gains on sales...........................................................................................
Losses on sales ..........................................................................................

¥35,013,724
169,352
33,521

¥21,543,637
87,911
141,143

(f) Securities with no available market value

March 31

Bonds classified as held-to-maturity

Millions of yen
Consolidated
balance sheet
amount

2008

2007

Unlisted foreign securities ...................................................................
Other ..................................................................................................

7
11,672

17
5,422

Other securities

Unlisted stocks (excluding OTC stocks) ..............................................
Unlisted bonds ....................................................................................
Unlisted foreign securities ...................................................................
Other ..................................................................................................

377,123
2,826,953
724,557
567,374

402,141
2,846,521
595,286
476,942

(g) Change of classification of securities

There are no corresponding transactions.

Millions of
U.S. dollars
2008

$349,473
1,690
335

Millions of
U.S. dollars
Consolidated
balance sheet
amount
2008

0
116

3,764
28,216
7,232
5,663

100

SMFG 2008

(h) Redemption schedule of other securities with maturities and held-to-maturity bonds

March 31

Bonds ........................................................................................................
Japanese government bonds..................................................................
Japanese local government bonds..........................................................
Japanese corporate bonds ......................................................................
Other ........................................................................................................
Total .........................................................................................................

March 31

(2) Money held in trust

(a) Money held in trust classified as trading purposes

Millions of yen
2008

Within 1 year

¥2,572,065
1,919,514
142,310
510,240
825,298
¥3,397,364

After 1 year
through 5 years

After 5 years
through 10 years

¥ 7,672,897
5,205,946
142,937
2,324,013
3,847,580
¥11,520,477

¥1,675,020
521,200
153,582
1,000,238
580,263
¥2,255,284

After 10 years

¥1,739,846
1,693,316
398
46,131
562,258
¥2,302,105

Millions of yen
2007

Within 1 year

¥3,564,060
2,824,945
101,824
637,290
665,251
¥4,229,311

After 1 year
through 5 years

After 5 years
through 10 years

¥4,284,559
1,872,346
161,564
2,250,648
495,728
¥4,780,288

¥2,346,081
956,640
307,293
1,082,146
701,134
¥3,047,215

After 10 years

¥2,082,953
1,986,136
421
96,396
956,785
¥3,039,739

Millions of U.S. dollars
2008

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years

$25,672
19,159
1,420
5,093
8,237
$33,909

$ 76,583
51,961
1,426
23,196
38,403
$114,986

$16,718
5,202
1,533
9,983
5,792
$22,510

$17,365
16,901
4
460
5,612
$22,977

March 31

Consolidated balance sheet amount...........................................................
Valuation gains included in the earnings for the fiscal year .......................

Millions of yen

2008

¥1,488
3

2007

—
—

(b) Money held in trust classified as held-to-maturity

There are no corresponding transactions.

March 31

Acquisition cost
Consolidated balance sheet amount
Net unrealized gains (losses)

Unrealized gains
Unrealized losses

Note: Consolidated balance sheet amount is calculated using market prices at the fiscal year-end.

Millions of yen

2008

¥ 5,870
5,841
(29)
—
29

2007

¥2,602
2,924
322
322
—

Millions of
U.S. dollars
2008

$15
0

Millions of
U.S. dollars
2008

$ 58
58
(0)
—
0

SMFG 2008 101

(3) Net unrealized gains on other securities and other money held in trust

March 31

Net unrealized gains.................................................................................
Other securities ...................................................................................
Other money held in trust ...................................................................
(–) Deferred tax liabilities .........................................................................
Net unrealized gains on other securities

(before following adjustment)................................................................
(–) Minority interests................................................................................
(+) SMFG’s interest in net unrealized gains on

valuation of other securities held by affiliates
accounted for by the equity method...................................................
Net unrealized gains on other securities....................................................

Millions of yen

2008

¥745,330
745,359
(29)
192,478

552,851
1,632

2007

¥1,825,564
1,825,242
322
567,845

1,257,719
8,589

(570)
¥550,648

13,004
¥1,262,135

Millions of
U.S. dollars
2008

$7,439
7,439
(0)
1,921

5,518
16

(6)
$5,496

Note: Net unrealized gains include foreign currency translation adjustments on non-marketable securities denominated in foreign currency.

32. Derivative Transactions

(1) Interest rate derivatives

March 31

Transactions listed on exchange
Interest rate futures:

Millions of yen
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥ 28,529,253
31,429,238

¥ 1,219,498
2,102,835

(79,013)
84,575

Interest rate options:

411,164
411,164

—
—

(49)
51

Over-the-counter transactions
Forward rate agreements:

Sold ...................................................................................................
Bought...............................................................................................
Interest rate swaps: ..................................................................................
Receivable fixed rate/payable floating rate ..........................................
Receivable floating rate/payable fixed rate ..........................................
Receivable floating rate/payable floating rate .....................................

—
5,487,572
431,702,347
204,294,602
204,725,780
22,565,295

—
189,577
306,921,182
148,030,995
143,672,565
15,101,309

Interest rate swaptions:

3,948,380
3,332,135

2,108,111
2,261,063

Caps:

31,659,913
15,801,704

20,654,248
9,592,055

Floors:

Other:

3,612,695
5,876,742

2,366,908
4,965,301
/

1,156,798
2,307,702

1,161,375
3,143,768
/

—
31
171,368
1,948,325
(1,770,092)
(1,749)

(62,141)
66,519

(13,437)
7,195

(10,171)
2,566

—
31
171,368
1,948,325
(1,770,092)
(1,749)

(62,141)
66,519

(13,437)
7,195

(10,171)
2,566

(23,224)
59,900
204,169

102

SMFG 2008

March 31

Transactions listed on exchange
Interest rate futures:

Millions of yen
2007

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥ 60,107,669
58,921,496

3,490,131
3,573,504

¥ 4,557
(3,229)

Interest rate options:

118,090
—

—
—

(20)
—

Over-the-counter transactions
Forward rate agreements:

Sold ...................................................................................................
Bought...............................................................................................
Interest rate swaps: .................................................................................
Receivable fixed rate/payable floating rate ..........................................
Receivable floating rate/payable fixed rate ..........................................
Receivable floating rate/payable floating rate .....................................

400,000
11,162,242
445,985,618
213,209,584
212,837,074
19,815,084

—
125,008
333,381,100
162,321,475
156,710,751
14,229,818

Interest rate swaptions:

3,163,737
3,380,799

1,550,186
2,002,072

Caps:

21,500,368
12,022,208

14,937,062
8,260,827

Floors:

Other:

842,962
3,569,523

1,950,131
4,049,334
/

709,538
2,042,491

1,368,826
2,440,410
/

278
(35)
57,891
(292,629)
342,402
13,821

(40,755)
61,695

(27,574)
16,947

(2,931)
1,342

(11,465)
27,040
¥ 83,740

278
(35)
57,891
(292,629)
342,402
13,821

(40,755)
61,695

(27,574)
16,947

(2,931)
1,342

(11,465)
27,040
¥ 83,740

March 31

Transactions listed on exchange
Interest rate futures:

Millions of U.S. dollars
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

$ 284,752
313,696

12,172
20,988

(789)
844

Interest rate options:

4,104
4,104

—
—

(0)
1

Over-the-counter transactions
Forward rate agreements:

Sold ...................................................................................................
Bought...............................................................................................
Interest rate swaps: .................................................................................
Receivable fixed rate/payable floating rate ..........................................
Receivable floating rate/payable fixed rate ..........................................
Receivable floating rate/payable floating rate .....................................

Interest rate swaptions:

Caps:

Floors:

Other:

—
54,772
4,308,837
2,039,072
2,043,375
225,225

39,409
33,258

315,999
157,717

36,058
58,656

23,624
49,559
/

—
1,892
3,063,391
1,477,503
1,434,001
150,727

21,041
22,568

206,151
95,739

11,546
23,033

11,592
31,378
/

—
0
1,710
19,446
(17,667)
(17)

(620)
664

(134)
72

(102)
26

—
0
1,710
19,446
(17,667)
(17)

(620)
664

(134)
72

(102)
26

(232)
598
2,038

Notes: 1. The above transactions are valued at market value and the valuation gains (losses) are accounted for in the consolidated statements of income. Derivative transactions

to which the deferred hedge accounting method is applied are not included in the amounts above.

2. Market value of transactions listed on exchange is calculated using the closing prices on the Tokyo Financial Exchange and others.

Market value of OTC transactions is calculated using discounted present value and option pricing models.

SMFG 2008 103

(2) Currency derivatives

March 31

Over-the-counter transactions
Currency swaps ........................................................................................
Currency swaptions:

March 31

Over-the-counter transactions
Currency swaps ........................................................................................
Currency swaptions:

March 31

Over-the-counter transactions
Currency swaps ........................................................................................
Currency swaptions:

Millions of yen
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥22,379,597

¥13,103,269

¥ (43,029)

¥ 160,284

829,741
930,422
56,377,725

6,126,597
5,963,302
/

824,731
908,013
5,755,015

2,706,432
2,662,166
/

(10,592)
27,161
140,241

(289,853)
315,610
¥ 139,537

(10,592)
27,161
140,241

(289,853)
315,610
¥ 342,851

Millions of yen
2007

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥20,642,376

¥12,660,922

¥ 42,405

¥ 55,918

866,633
896,229
61,066,579

4,501,193
4,344,112
/

863,798
890,206
5,056,679

2,381,131
2,195,492
/

3,489
4,146
(104,438)

3,487
4,149
(104,438)

(159,703)
98,237
¥ (115,862)

(159,703)
98,237
¥ (102,349)

Millions of U.S. dollars
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

$ 223,372

$ 130,784

$ (429)

$ 1,600

8,282
9,287
562,708

61,150
59,520
/

8,232
9,063
57,441

27,013
26,571
/

(106)
271
1,400

(2,893)
3,150
$ 1,393

(106)
271
1,400

(2,893)
3,150
$ 3,422

Notes: 1. The above transactions are valued at market value and the valuation gains (losses) are accounted for in the consolidated statements of income. The amounts above do

not include the following:
(a) Derivative transactions to which the deferred hedge accounting method is applied;
(b) Those that are allotted to financial assets/liabilities denominated in foreign currencies and whose market values are already reflected to the consolidated balance

sheets; and

(c) Those that are allotted to financial assets/liabilities denominated in foreign currencies, and the financial assets/liabilities are eliminated in the process of

consolidation.

2. Market value is calculated using discounted present value and option pricing models.

104

SMFG 2008

(3) Equity derivatives

March 31

Transactions listed on exchange
Equity price index futures:

Millions of yen
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥ 86,574
41,498

—
—

64
151

Over-the-counter transactions
Equity options:

260,068
260,068
/

(32,730)
32,730
216

March 31

Transactions listed on exchange
Equity price index futures:

Millions of yen
2007

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥ 13,146
19,646

—
—

¥(150)
403

Over-the-counter transactions
Equity options:

17,000
252,092
/

17,000
105,043
/

587
(587)
¥ 252

March 31

Transactions listed on exchange
Equity price index futures:

Millions of U.S. dollars
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

$ 864
414

$ —
—

Over-the-counter transactions
Equity options:

2,596
2,596
/

1
1

(327)
327
2

1
1

(327)
327
2

Notes: 1. The above transactions are valued at market value and the valuation gains (losses) are accounted for in the consolidated statements of income.

Derivative transactions to which the deferred hedge accounting method is applied are not included in the amounts above.
2. Market value of transactions listed on exchange is calculated using the closing prices on the Tokyo Stock Exchange and others.

Market value of OTC transactions is calculated using option pricing models.

SMFG 2008 105

(4) Bond derivatives

March 31

Transactions listed on exchange
Bond futures:

Millions of yen
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥1,659,033
1,635,163

¥ —
—

Bond futures options:

—
14,500

Over-the-counter transactions
Forward bond agreements:

Bond options:

—
59,577

240,000
240,000
/

—
—

—
57,239

—
—
/

¥ 173
(762)

—
65

—
1,246

(425)
975
¥1,272

¥ 173
(762)

—
65

—
1,246

(425)
975
¥1,272

March 31

Transactions listed on exchange
Bond futures:

Millions of yen
2007

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥667,769
655,089

—
—

¥1,895
(1,680)

Over-the-counter transactions
Forward bond agreements:

—
69,970
/

—
65,498
/

—
1,575
¥1,791

March 31

Transactions listed on exchange
Bond futures:

Bond futures options:

Over-the-counter transactions
Forward bond agreements:

Bond options:

Millions of U.S. dollars
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

$16,559
16,321

—
145

—
595

2,395
2,395
/

$ —
—

—
—

—
571

—
—
/

$ 2
(8)

—
1

—
12

(4)
10
$13

$ 2
(8)

—
1

—
12

(4)
10
$13

Notes: 1. The above transactions are valued at market value and the valuation gains (losses) are accounted for in the consolidated statements of income.

Market value of OTC transactions is calculated using discounted present value and option pricing models.

106

SMFG 2008

(5) Commodity derivatives

March 31

Transactions listed on exchange
Commodity futures:

Millions of yen
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

—
208

—
—

—
2

Over-the-counter transactions
Commodity swaps:

Receivable fixed price/payable floating price ......................................
Receivable floating price/payable fixed price ......................................

Commodity options:

296,505
220,340

18,211
38,455
/

267,523
193,772

7,165
26,786
/

(137,666)
213,001

(2,011)
6,595
¥ 79,921

(137,666)
213,001

(2,011)
6,595
¥ 79,921

March 31

Transactions listed on exchange
Commodity futures:

Commodity futures options:

Over-the-counter transactions
Commodity swaps:

Receivable fixed price/payable floating price ......................................
Receivable floating price/payable fixed price ......................................
Receivable fixed price/payable fixed price...........................................

Commodity options:

March 31

Transactions listed on exchange
Commodity futures:

Millions of yen
2007

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

237
359

949
949

359,881
259,581
17,821

7,624
38,356
/

—
—

311,948
209,132
—

7,058
30,957
/

(3)
6

(43)
43

(3)
6

(43)
43

(69,212)
157,000
29

(945)
6,304
¥ 93,180

(69,212)
157,000
29

(945)
6,304
¥ 93,180

Millions of U.S. dollars
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

$ —
2

$ —
—

$ —
0

Over-the-counter transactions
Commodity swaps:

Receivable fixed price/payable floating price ......................................
Receivable floating price/payable fixed price ......................................

Commodity options:

2,959
2,199

182
384
/

2,670
1,934

72
267
/

(1,374)
2,126

(20)
66
798

(1,374)
2,126

(20)
66
798

Notes: 1. The above transactions are valued at market value and the valuation gains (losses) are accounted for in the consolidated statements of income.

Derivative transactions to which the deferred hedge accounting method is applied are not included in the amounts above.

2. Market value of transactions listed on exchange is calculated using the closing prices on the New York Mercantile Exchange and others.

Market value of OTC transactions is calculated based on factors such as price of the relevant commodity and contract term.

3. Commodity derivatives are transactions on fuel and metal.

SMFG 2008 107

(6) Credit derivative transactions

March 31

Over-the-counter transactions
Credit default options:

Millions of yen
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥1,421,367
1,912,377

¥1,302,732
1,710,521

Other:

10
10
/

—
—
/

¥(39,531)
77,378

(2)
2
¥ 37,846

¥(39,531)
77,378

(2)
2
¥ 37,846

March 31

Over-the-counter transactions
Credit default options:

Millions of yen
2007

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

¥1,322,651
1,514,279

¥1,295,611
1,509,279

Other:

40
40
/

—
—
/

¥2,628
(1,816)

(3)
3
¥ 812

¥2,628
(1,816)

(3)
3
¥ 812

March 31

Over-the-counter transactions
Credit default options:

Millions of U.S. dollars
2008

Contract amount

Total

Over 1 year

Market
value

Valuation
gains (losses)

$14,187
19,088

$13,003
17,073

Other:

0
0
/

—
—
/

$(395)
773

(0)
0
$ 378

$(395)
773

(0)
0
$ 378

Notes: 1. The above transactions are valued at market value and the valuation gains (losses) are accounted for in the consolidated statements of income.

Derivative transactions to which the deferred hedge accounting method is applied are not included in the amounts above.

2. Market value is calculated using discounted present value and option pricing models.
3. “Sold” represents transactions in which the credit risk is accepted; “Bought” represents transactions in which the credit risk is transferred.

108

SMFG 2008

33. Stock Options

SMFG applied the “Accounting Standard for Share-based Payment” and the related guidance from the fiscal year beginning on April 1, 2006.
These accounting standards require companies to recognize compensation expense for stock acquisition rights based on the fair value at the
grant date and over the vesting periods for stock acquisition rights newly granted on and after May 1, 2006. Share-based compensation expense
of ¥29 million ($0 million) and ¥14 million are accounted for as general and administrative expenses in the fiscal year ended March 31, 2008
and 2007, respectively.

Outline of stock options and changes are as follows:
(1) SMFG

(a) Outline of stock options

Date of resolution

Title and number of grantees.......................................................................................
Number of stock options .............................................................................................
Grant date...................................................................................................................
Condition for vesting ..................................................................................................
Requisite service period...............................................................................................
Exercise period ............................................................................................................

(b) Stock options granted and changes
Number of stock options
Date of resolution

Before vested

Previous fiscal year-end..........................................................................................
Granted.................................................................................................................
Forfeited................................................................................................................
Vested ...................................................................................................................
Outstanding ..........................................................................................................

After vested

Previous fiscal year-end..........................................................................................
Vested ...................................................................................................................
Exercised ...............................................................................................................
Forfeited................................................................................................................
Exercisable ............................................................................................................

Price information (Yen)
Date of resolution

Exercise price ..............................................................................................................
Average exercise price .................................................................................................
Fair value at the grant date..........................................................................................

(2) A consolidated subsidiary, Kansai Urban Banking Corporation

June 27, 2002

Directors and employees of SMFG and SMBC: 677
Common shares: 1,620
August 30, 2002
N.A.
N.A.
June 28, 2004 to June 27, 2012

June 27, 2002

—
—
—
—
—

1,116
—
35
—
1,081

June 27, 2002

¥ 669,775
1,188,285
—

(a) Outline of stock options

Date of resolution

Title and number of grantees ...................................................

Number of stock options..........................................................

Grant date................................................................................
Condition for vesting ...............................................................
Requisite service period ...........................................................
Exercise period.........................................................................

June 28, 2001

June 27, 2002

June 27, 2003

June 29, 2004

June 29, 2005

Directors and
employees
45
Common shares
238,000
July 31, 2001
N.A.
N.A.
June 29, 2003
to June 28,
2011

Directors and
employees
44
Common shares
234,000
July 31, 2002
N.A.
N.A.
June 28, 2004
to June 27,
2012

Directors and
employees
65
Common shares
306,000
July 31, 2003
N.A.
N.A.
June 28, 2005
to June 27,
2013

Directors and
employees
174
Common shares
399,000
July 30, 2004
N.A.
N.A.
June 30, 2006
to June 29,
2014

Directors and
employees
183
Common shares
464,000
July 29, 2005
N.A.
N.A.
June 30, 2007
to June 29,
2015

Date of resolution

Title and number of grantees ...................................................

Number of stock options..........................................................

June 29, 2006

June 28, 2007

Directors
9

Common shares
162,000
July 31, 2006
N.A.
N.A.
June 30, 2008
to June 29,
2016

Officers not
doubling as
directors 14
Employees 46
Common shares
115,000
July 31, 2006
N.A.
N.A.
June 30, 2008
to June 29,
2016

Directors
10

Common shares
174,000
July 31, 2007
N.A.
N.A.
June 29, 2009
to June 28,
2017

Officers not
doubling as
directors 14
Employees 48
Common shares
112,000
July 31, 2007
N.A.
N.A.
June 29, 2009
to June 28,
2017

SMFG 2008 109

(b) Stock options granted and changes
Number of stock options
Date of resolution

Before vested

June 28, 2001

June 27, 2002

June 27, 2003

June 29, 2004

June 29, 2005

Previous fiscal year-end ......................................................
Granted..............................................................................
Forfeited.............................................................................
Vested ................................................................................
Outstanding.......................................................................

After vested

Previous fiscal year-end ......................................................
Vested ................................................................................
Exercised ............................................................................
Forfeited.............................................................................
Exercisable .........................................................................

—
—
—
—
—

174,000
—
52,000
—
122,000

—
—
—
—
—

174,000
—
16,000
—
158,000

—
—
—
—
—

256,000
—
26,000
—
230,000

—
—
—
—
—

363,000
—
33,000
—
330,000

464,000
—
—
464,000
—

—
464,000
13,000
—
451,000

Date of resolution

Before vested

June 29, 2006

June 28, 2007

After vested

162,000
—
—
—
162,000

—
—
—
—
—

115,000
—
—
—
115,000

—
—
—
—
—

—
174,000
—
—
174,000

—
—
—
—
—

—
112,000
—
—
112,000

—
—
—
—
—

Price information (Yen)
Date of resolution

June 28, 2001

June 27, 2002

June 27, 2003

June 29, 2004

June 29, 2005

Exercise price ...........................................................................
Average exercise price ..............................................................
Fair value at the grant date.......................................................

¥155
¥415
—

¥131
¥358
—

¥179
¥360
—

¥202
¥380
—

¥313
¥335
—

Date of resolution

June 29, 2006

June 28, 2007

¥490
—
¥138

¥461
—
¥ 96

Stock options granted in the fiscal year ended March 31, 2008 were valued using the Black-Scholes option pricing model and the
principal parameters were as follows:

Date of resolution

Expected volatility *1 ................................................................................................
Average expected life*2.............................................................................................
Expected dividends*3 ...............................................................................................
Risk-free interest rate*4 ............................................................................................

June 28, 2007

36.91%
5 years
¥5 per share
1.39%

*1 Calculated based on the actual stock prices during the five years from June 2002 to June 2007.
*2 The average expected life could not be estimated rationally due to an insufficient amount of data. Therefore, it was estimated assuming that the options were exercised at the

midpoint of the exercise period.

*3 The actual dividends on common stock for the fiscal year ended March 31, 2007.
*4 Japanese government bond yield corresponding to the average expected life.

(d) Method of estimating number of stock options vested

Only the actual number of forfeited stock options is reflected because it is difficult to rationally estimate the actual number of stock
options that will be forfeited in the future.

110

SMFG 2008

34. Segment Information

(1) Business segment information

Year ended March 31

I. Ordinary income

(1) External customers...........................
(2) Intersegment....................................
Total .....................................................
Ordinary expenses.....................................
Ordinary profit .........................................
II. Assets, depreciation, losses on impairment
of fixed assets and capital expenditure
Assets....................................................
Depreciation..........................................
Losses on impairment of fixed assets ......
Capital expenditure ...............................

Year ended March 31

I. Ordinary income

Year ended March 31

I. Ordinary income

Millions of yen
2008

Banking business

Leasing business

Other business

Total

Elimination

Consolidated

¥ 3,185,057
58,113
3,243,171
2,501,702
741,469

¥ 945,193
20,644
965,837
921,338
44,499

¥ 493,293
249,030
742,324
669,064
73,259

4,623,545
327,788
4,951,333
4,092,105
859,228

—

4,623,545

(327,788)
(327,788)
(299,720)
(28,067)

—

4,623,545
3,792,384
831,160

¥107,336,930
61,223
4,740
99,277

¥3,020,106
399,910
109
458,002

¥6,707,715
25,972
310
36,007

¥117,064,752
487,106
5,161
593,286

¥ (5,108,833)
16
—
3

¥111,955,918
487,122
5,161
593,290

Millions of yen
2007

Banking business

Leasing business

Other business

Total

Elimination

Consolidated

¥ 2,689,086
53,714
2,742,800
1,993,893
748,907

¥ 783,119
20,831
803,951
759,103
44,847

¥ 429,052
220,369
649,421
609,781
39,640

3,901,259
294,914
4,196,173
3,362,779
833,394

—
(294,914)
(294,914)
(260,130)
(34,784)

3,901,259
—
3,901,259
3,102,649
798,610

¥97,525,686
59,908
4,661
216,612

¥2,241,572
336,712
—
390,455

¥5,663,614
17,630
25,887
27,565

¥105,430,874
414,251
30,548
634,633

¥(4,572,564)
16
—
13

¥100,858,309
414,268
30,548
634,647

Banking business

Leasing business

Millions of U.S. dollars
2008
Other business

Total

Elimination

Consolidated

31,791
580
32,371
24,970
7,401

$1,071,334
611
47
991

$ 9,434
206
9,640
9,196
444

$30,144
3,992
1
4,571

$ 4,923
2,486
7,409
6,678
731

46,148
3,272
49,420
40,844
8,576

—

46,148

(3,272)
(3,272)
(2,992)
(280)

—

46,148
37,852
8,296

$66,950
259
3
359

$1,168,428
4,862
52
5,922

$ (50,991)
0
—
0

$1,117,436
4,862
52
5,922

Notes:1. The business segmentation is classified based on SMFG’s internal management purpose. Ordinary income and ordinary profit are presented as counterparts of sales and

operating profit of companies in other industries.

2. “Other business” includes securities, credit card, investment banking, loans, venture capital, system development and information processing.
3. Assets in Elimination include unallocated corporate assets of ¥4,101,536 million ($40,938 million) and ¥4,012,414 million at March 31, 2008 and 2007, respectively,

which mainly consist of investments in subsidiaries and affiliates.

4. Ordinary income represents total income excluding gains on disposal of fixed assets, collection of written-off claims, gains on change in equity due to mergers of

subsidiaries, gains on return of securities from employee retirement benefits trust and others.

Ordinary expenses represent total expenses excluding losses on disposal of fixed assets, losses on impairment of fixed assets and others.

5. As mentioned in Note 2. (11), formerly, deposits which were derecognized as liabilities were expensed when they were actually reimbursed. However, from the fiscal

year ended March 31, 2008, such reserve is provided in the estimated amount based on the historical reimbursement experience in accordance with the “Treatment for
Auditing of Reserve under Special Taxation Measures Law, Reserve under Special Laws and Reserve for Retirement Benefits to Directors and Corporate Auditors”
(JICPA Audit and Assurance Practice Committee Report No. 42) of April 13, 2007. As a result, Ordinary profit of “Banking business” for the year ended March 31,
2008 decreased by ¥10,417 million ($104 million) each as compared with the former method.

SMFG 2008 111

(2) Geographic segment information

Millions of yen
2008

Year ended March 31

I. Ordinary income

Japan

The Americas

(1) External customers..
(2) Intersegment.........
Total ..........................
Ordinary expenses ..........
Ordinary profit ..............

¥ 3,911,887
121,804
4,033,692
3,359,217
674,474

¥ 280,556
59,437
339,994
240,378
99,615

Europe and
Middle East

¥ 249,321
11,000
260,321
249,869
10,451

Asia and Oceania

Total

Elimination

Consolidated

¥ 181,780
39,046
220,826
156,831
63,994

4,623,545
231,289
4,854,834
4,006,298
848,536

—

4,623,545

(231,289)
(231,289)
(213,913)
(17,375)

—

4,623,545
3,792,384
831,160

II. Assets ............................

¥ 96,694,481

¥7,590,359

¥4,875,150

¥5,501,957

¥114,661,949

¥ (2,706,030)

¥111,955,918

Millions of yen
2007

Year ended March 31

I. Ordinary income

Japan

The Americas

(1) External customers..
(2) Intersegment.........
Total ..........................
Ordinary expenses ..........
Ordinary profit ..............

¥ 3,238,374
98,720
3,337,094
2,686,461
650,633

¥ 247,208
46,833
294,042
222,992
71,049

Europe and
Middle East

¥ 203,585
9,974
213,559
177,377
36,182

Asia and Oceania

Total

Elimination

Consolidated

¥ 212,090
59,802
271,892
202,955
68,937

3,901,259
215,330
4,116,589
3,289,786
826,802

—
(215,330)
(215,330)
(187,137)
(28,192)

3,901,259
—
3,901,259
3,102,649
798,610

II. Assets ............................

¥89,301,196

¥ 5,775,716

¥ 3,190,553

¥ 4,514,648

¥102,782,115

¥ (1,923,805)

¥100,858,309

Millions of U.S. dollars
2008

Year ended March 31

I. Ordinary income

(1) External customers..
(2) Intersegment.........
Total ..........................
Ordinary expenses ..........
Ordinary profit ..............

Japan

The Americas

$ 39,045
1,215
40,260
33,528
6,732

$ 2,801
593
3,394
2,400
994

Europe and
Middle East

$ 2,488
110
2,598
2,494
104

Asia and Oceania

Total

Elimination

Consolidated

$ 1,814
390
2,204
1,565
639

46,148
2,308
48,456
39,987
8,469

—

46,148

(2,308)
(2,308)
(2,135)
(173)

—

46,148
37,852
8,296

II. Assets ............................

$965,111

$75,760

$48,659

$54,915

$1,144,445

$ (27,009)

$1,117,436

Notes: 1. The geographic segmentation is classified based on the degrees of the following factors: geographic proximity, similarity of economic activities and relationship of
business activities among regions. Ordinary income and ordinary profit are presented as counterparts of sales and operating profit of companies in other industries.
2. The Americas includes the United States, Brazil, Canada and others; Europe and the Middle East includes the United Kingdom, Germany, France and others; Asia

and Oceania includes Hong Kong, Singapore, Australia and others except Japan.

3. Assets in Elimination include unallocated corporate assets of ¥4,101,536 million ($40,938 million) and ¥4,012,414 million at March 31, 2008 and 2007,

respectively, which mainly consist of investments in subsidiaries and affiliates.

4. Ordinary income represents total income excluding gains on disposal of fixed assets, collection of written-off claims, gains on change in equity due to mergers of

subsidiaries, gains on return of securities from employee retirement benefits trust and others.
Ordinary expenses represent total expenses excluding losses on disposal of fixed assets, losses on impairment of fixed assets and others.

5. As mentioned in Note 2. (11), formerly, deposits which were derecognized as liabilities were expensed when they were actually reimbursed. However, from the fiscal
year ended March 31, 2008, such reserve is provided in the estimated amount based on the historical reimbursement experience in accordance with the “Treatment
for Auditing of Reserve under Special Taxation Measures Law, Reserve under Special Laws and Reserve for Retirement Benefits to Directors and Corporate Auditors”
(JICPA Audit and Assurance Practice Committee Report No. 42) of April 13, 2007. As a result, Ordinary profit of “Japan” for the year ended March 31, 2008
decreased by ¥10,417 million ($104 million) each as compared with the former method.

112

SMFG 2008

(3) Ordinary income from overseas operations

Year ended March 31

Consolidated ordinary income from overseas operations (A) ......................
Consolidated ordinary income (B).............................................................
(A) / (B)....................................................................................................

Millions of yen

2008

¥ 711,657
4,623,545

2007

¥ 662,884
3,901,259

15.4%

17.0%

Millions of
U.S. dollars
2008

$ 7,103
46,148

15.4%

Notes: 1. Consolidated ordinary income from overseas operations is presented as a counterpart of overseas sales of companies in other industries.

2. The above table shows ordinary income from transactions of overseas branches of domestic consolidated banking subsidiaries and transactions of overseas consolidated

subsidiaries, excluding internal income. These extensive transactions are not categorized by transaction party, and the geographic segment information is not
presented because such information is not available.

35. Special Purpose Entities
SMBC, a consolidated subsidiary of SMFG, provides loans, credit
lines and liquidity lines to fourteen special purpose entities (“SPEs”)
for their fund needs and issuing of commercial papers. The SPEs are
engaged in purchases of monetary claims such as receivables from
SMBC customers, and incorporated under the laws of the Cayman
Islands or as intermediate corporations with limited liabilities.

The combined assets and liabilities of the fourteen SPEs as of their

most recent closing dates were ¥3,219,524 million ($32,134
million) and ¥3,219,835 million ($32,137 million), respectively.
SMBC has no voting rights in the SPEs and sends no directors or
employees.

The amounts of principal transactions with these SPEs in the year

ended March 31, 2008 are as follows:

As of and year ended March 31

Millions of yen
2008

Balances

Loans and bills discounted .......................................................
Credit lines..............................................................................
Liquidity lines .........................................................................

¥1,803,952
905,533
326,074

Interest on loans and discounts..................................................
Fees and commissions ...............................................................
—

As of and year ended March 31

Millions of U.S. dollars
2008

Balances

$18,005
9,038
3,255

Interest on loans and discounts..................................................
Fees and commissions ...............................................................
—

Income

¥25,194
2,509
—

Income

$251
25
—

36. Business Combinations
Fiscal year ended March 31, 2008

SMFG, SMBC Leasing Company, Limited (“SMBC Leasing”) and
SMBC Auto Leasing Company, Limited (“SMBC Auto Leasing”)
reached a final agreement with Sumitomo Corporation, Sumisho
Lease Co., Ltd. (“Sumisho Lease”) and Sumisho Auto Leasing
Corporation (“Sumisho Auto Lease”) on July 30, 2007 concerning
strategic joint businesses in leasing and auto leasing business and
mergers of two businesses (a merger between SMBC Leasing and

A merger of leasing companies
1. Outline of the business combination of leasing companies

(1) Name and business of the acquired company

Sumisho Lease (Leasing business)

Sumisho Lease, and a merger between SMBC Auto Leasing and
Sumisho Auto Lease). They also concluded “Basic Agreement
Concerning the Joint Business” and “Merger Agreement” with
respect to the two businesses. In accordance with the merger
agreements, SMBC Leasing and Sumisho Lease merged on October 1,
2007, and SMBC Auto Leasing and Sumisho Auto Lease also merged
on the same day.

(2) Reason for the business combination

SMBC Leasing and Sumisho Lease have merged with the
aim of achieving the highest leasing volume in Japan by
leveraging the blue-chip customer bases of both the SMFG
Group and the Sumitomo Corporation Group, and to create
a high quality leasing company that can respond accurately
and timely to market needs which are becoming

increasingly sophisticated, by combining and blending the finance
know-how of SMBC Leasing as a subsidiary of a bank and the
product and distribution know-how of Sumisho Lease as a subsidiary
of a trading company, thereby promoting diversification and
differentiation of products and providing more value-added products
going beyond traditional approaches.

SMFG 2008 113

(3) Date of the business combination

October 1, 2007

(4) Legal form of business combination

The merger was a merger procedure by absorption with Sumisho Lease as the surviving company and SMBC Leasing was dissolved.
(Name of the merged company: Sumitomo Mitsui Finance and Leasing Company, Limited)

(5) Name of a controlling entity after the business combination

Sumitomo Mitsui Financial Group, Inc.

(6) Percentage share of voting rights SMFG has acquired

55%

2. Period of the acquired company’s financial results included in the consolidated financial statements

From October 1, 2007 to March 31, 2008

3. Acquisition cost of the acquired company

45% of the fair value of SMBC Leasing’s common stock.................................................
45% of the fair value of SMBC Leasing’s preferred stock ................................................
Acquisition cost .............................................................................................................

¥ 140,648
24,750
¥ 165,398

$1,404
247
$1,651

Millions of yen

Millions of U.S. dollars

4. Merger ratio, calculation method, number of shares delivered and valuation

(1) Merger ratio

Common stock

Sumisho Lease 1 : SMBC Leasing 1.4859*

Preferred stock

Sumisho Lease 1 : SMBC Leasing 5.7050*

* The amounts are rounded down to the nearest ten-thousandth.

(2) Basis for calculation of the merger ratio

In order to ensure the fairness and reasonableness of the merger ratio (hereinafter referred to as the “merger ratio”), SMBC Leasing and
Sumisho Lease conducted negotiation and discussion based on the analysis of the merger ratio provided by each financial advisor, Daiwa
Securities SMBC Co. Ltd., appointed by SMBC Leasing, and Nomura Securities Co., Ltd., appointed by Sumisho Lease, respectively.

(3) Number of shares delivered and value

52,422,762 shares of common stock of Sumisho Lease were allocated for 31,375,000 shares (30,000,000 shares of common stock and
1,375,000 shares of preferred stock) of SMBC Leasing (44,578,289 shares of Sumisho Lease’s common stock for SMBC Leasing’s
common stock and 7,844,473 shares of Sumisho Lease’s common stock for SMBC Leasing’s preferred stock). Total estimated value
amounted to ¥367,552 million ($3,669 million).

5. Goodwill, reason for recognizing goodwill, amortization method and amortization period

(1) Amount of goodwill

¥88,090 million ($879 million)

(2) Reason for recognizing goodwill

SMFG accounted for the difference between the acquisition cost and the increased amount of interests in Sumisho Lease as goodwill.

(3) Method and term to amortize goodwill
Straight-line method over 20 years

114

SMFG 2008

6. Amounts of assets and liabilities acquired on the day of the business combination

(1) Assets

Total assets ....................................................................................................................
Lease assets ...............................................................................................................
Loans and bills discounted ........................................................................................

¥ 1,392,490
632,224
329,069

$13,898
6,310
3,284

Millions of yen

Millions of U.S. dollars

(2) Liabilities

Total liabilities ..............................................................................................................
Borrowed money.......................................................................................................
Short-term bonds......................................................................................................

¥ 1,249,703
571,741
393,000

$12,473
5,707
3,923

Millions of yen

Millions of U.S. dollars

7. Approximate amounts of impact on the consolidated statement of income for the fiscal year ended March 31, 2008, assuming that the

business combinations had been completed on the commencement date of the fiscal year.
(1) The difference between the pro-forma ordinary income and other income information assuming that the business combinations had
been completed on the commencement date of the fiscal year and the actual ordinary income and other income information which is
recorded in the consolidated statement of income is as follows.

Millions of yen

Millions of U.S. dollars

Ordinary income............................................................................................................
Ordinary profit ..............................................................................................................
Net income....................................................................................................................

¥ 277,442
35,319
30,938

$2,769
353
309

(2) Calculation method of the pro-forma amounts and material assumptions

The pro-forma amounts are calculated retroactively to the commencement date of the fiscal year based on the amounts stated in

Sumisho Lease’s statement of income for the period from April 1, 2007 to September 30, 2007. However, such amounts do not
indicate the results of operations in case the business combinations are actually completed on the commencement date of the fiscal year.

The pro-forma information mentioned above has not been audited by KPMG AZSA & Co.

A merger of auto leasing companies
1. Outline of the business combination of auto leasing companies

(1) Name and business of the companies

Acquiring company: Sumisho Auto Lease (Auto leasing business)
Acquired company: SMBC Auto Leasing (Auto leasing business)

(2) Reason for the business combination

Sumisho Auto Lease and SMBC Auto Leasing have merged
to survive and thrive in the auto leasing industry that is
becoming increasingly competitive and to establish a
structure to capture the number one market share by
capitalizing on the high-quality customer bases of both the
Sumitomo Corporation Group and the SMFG Group and
combining the high-value-added services of Sumisho Auto

(3) Date of the business combination

October 1, 2007

(4) Legal form of business combination

Lease based on its value chain and business network of SMBC Auto
Leasing. Another aim of the merger is to achieve better customer
satisfaction by combining and blending the product and distribution
know-how of Sumisho Auto Lease as a subsidiary of a trading
company, and the finance know-how of SMBC Auto Leasing as a
subsidiary of a bank, thereby pursuing various services.

The merger was a merger procedure by absorption with Sumisho Auto Leasing as the surviving company, and SMBC Auto Leasing
was dissolved. (Name of the merged company: Sumitomo Mitsui Auto Service Company, Limited)

2. Outline of accounting method

SMFG will apply the accounting procedures stipulated by Article 20 of the “Accounting Standard for Business Divestitures” (ASBJ Statement
No. 7).

SMFG 2008 115

3. Name of the business segment, in which the subsidiary was included, in the segment information

Leasing business

4. Consolidated statement of income for the fiscal year included the following earnings of SMBC Auto Leasing: (approximate amounts)

Millions of yen

Millions of U.S. dollars

¥69,752
2,237
1,254

$696
22
13

5. Status after the business combination

SMBC Auto Leasing and its subsidiaries are excluded from the scope of consolidation, and Sumitomo Mitsui Auto Service Company,
Limited and its subsidiaries have become affiliated companies accounted for by the equity method.

Fiscal year ended March 31, 2007

1. Outline of the transactions

(1) Name and business of combined entity

SMBC Friend Securities Co., Ltd. (“SMBC Friend Securities”)
Securities business
(2) Form of reorganization
Exchange of shares

(3) Name of the entity after the reorganization

Sumitomo Mitsui Financial Group, Inc. (“SMFG”)

(4) Outline and purpose of the transaction

In accordance with the stabilization of the Japanese
financial system, Japanese households’ portfolios have
shown clear signs of a shift from savings to investment,
and their investment needs are expected to become
further diversified. At the same time, we believe that new
types of asset management services will become popular
among individual investors who improve their financial
knowledge and have an increased interest in portfolio

management based on asset allocation concepts.
In view of these trends, SMFG will further strengthen cooperation
among group companies by making SMBC Friend Securities a
wholly-owned subsidiary, establishing a new business model
distinct from the conventional one by combining banking and
securities businesses and maximizing synergies between them.
With such initiatives, SMFG will try to make every effort to
enhance the enterprise value of the whole group.

2. Accounting method

SMFG applied the following accounting treatments stipulated by the Accounting Standard for Business Combinations to the
consolidated and nonconsolidated financial statements:
“Chapter 3 Accounting Standard for Business Combinations, Article 4 Accounting treatment for the transactions under common
control, Paragraph 2 Transactions with minority shareholders.”

3. Additional acquisition of subsidiary’s shares

(1) Acquisition cost

Common shares........................................................................................................................................
Expenses for acquiring the common shares ...............................................................................................
Acquisition cost .......................................................................................................................................

(2) Share exchange ratio, its basis for determination, number of shares delivered and its values

Millions of yen

¥ 221,365
160
¥ 221,525

(a) Type of shares and share exchange ratio

Common shares
SMFG 1: SMBC Friend Securities 0.0008
(b) Basis for determination of share exchange ratio

SMFG appointed Goldman Sachs ( Japan) Ltd. as its financial advisor and SMBC Friend Securities appointed Merrill Lynch
Japan Securities Co., Ltd. as its financial advisor. SMFG and SMBC Friend Securities comprehensively considered numerous
factors including results of the analyses provided by their respective financial advisors, and discussed and agreed to the above.

249,015 shares
¥221,525 million

116

SMFG 2008

(3) Goodwill, reason for recognizing goodwill, amortization method and amortization term

(a) Amount of goodwill
¥99,995 million

(b) Reason for recognizing goodwill

SMFG accounted for the difference between the acquisition cost of additional shares of common stock of SMBC Friend
Securities, and the decrease in minority interests, as goodwill.

37. Per Share Data

March 31

Yen

2008

2007

U.S. dollars
2008

Net assets per share ............................................................................................

¥424,546.01

¥469,228.59

$ 4,237.41

Year ended March 31

Yen

2008

2007

Net income per share..........................................................................................
Net income per share (diluted) ...........................................................................

¥59,298.24
56,657.41

¥57,085.83
51,494.17

U.S. dollars
2008

$591.86
565.50

Notes: 1. The ASBJ revised “Guidance on Accounting Standard for Earnings per Share” (ASBJ Guidance No. 4, issued on September 25, 2002) on January 31, 2006, and the
revised Guidance was applicable from the fiscal year ending on or after May 1, 2006, the implementation date of the Company Law. Effective April 1, 2006, SMFG
applied the revised Guidance and calculated net assets per share by including net deferred gains (losses) on hedges. This accounting change decreased net assets per share
at March 31, 2007 by ¥11,596.71 compared with the former method.

2. Net income per share and net income per share (diluted) are calculated based on the following:

Year ended March 31

Net income per share
Net income...........................................................................................................
Amount not attributable to common stockholders ................................................
Dividends on preferred stock ...........................................................................
Net income attributable to common stock ............................................................
Average number of common stock during the year (in thousands) .........................

Net income per share (diluted)
Adjustment for net income ...................................................................................
Dividends on preferred stock ...........................................................................
Stock acquisition rights issued by subsidiaries and affiliates.............................
Increase in number of common stock (in thousands)..............................................
Preferred stock ................................................................................................
Stock acquisition rights ...................................................................................

3. Net assets per share is calculated based on the following:

March 31

Net assets..............................................................................................................
Amounts excluded from Net assets .......................................................................
Preferred stock ................................................................................................
Dividends on preferred stock ...........................................................................
Stock acquisition rights ...................................................................................
Minority interests............................................................................................
Net assets attributable to common stock at the fiscal year-end ..............................
Number of common stock at the fiscal year-end used for

the calculation of Net assets per share (in thousands)..........................................

Millions of yen,
except number of shares
2008

2007

Millions of
U.S. dollars
2008

¥ 461,536
12,958
12,958
448,577
7,564

6,751
6,763
(11)
471
471
0

¥ 441,351
12,958
12,958
428,392
7,504

6,748
6,763
(14)
945
945
0

Millions of yen,
except number of shares

2008

¥ 5,224,076
2,012,532
360,303
6,479
43
1,645,705
3,211,544

2007

¥ 5,331,279
1,781,555
360,303
12,958
14
1,408,279
3,549,724

7,564

7,565

$ 4,607
129
129
4,477
/

67
68
(0)
/
/
/

Millions of
U.S. dollars
2008

$52,142
20,087
3,596
65
0
16,426
32,055

SMFG 2008 117

38. Subsequent Events
(1) The following appropriation of retained earnings of SMFG at March 31, 2008 was approved by the ordinary general meeting of

shareholders held on June 27, 2008:

Cash dividends,

¥7,000 per share on common stock..................................................................
¥67,500 per share on preferred stock (1st to 12th series Type 4)......................
¥44,250 per share on preferred stock (1st series Type 6) ..................................

Millions of yen

¥53,655
3,381
3,097

Millions of
U.S. dollars

$ 536
34
31

(2) SMFG resolved at the meeting of the Board of Directors held on April 28, 2008 to authorize the redemption in full of the preferred
securities issued by its overseas special purpose subsidiary. The outline of the preferred securities to be redeemed is as follows.

Issuer .....................................
Type of securities issued .........
Total redemption amount.......
Scheduled redemption date ....
Reason for redemption ...........

SB Treasury Company L.L.C.
Non-cumulative perpetual preferred securities
$1,800 million
June 30, 2008
Optional redemption

(3) SMFG resolved at the meeting of the Board of Directors held on April 28, 2008 to issue preferred securities through overseas special

purpose subsidiaries and establish wholly-owned subsidiaries in Cayman Island. The preferred securities issued on May 12, 2008 were as
follows.
Issuer.........................

SMFG Preferred Capital USD 2 Limited

An overseas special purpose subsidiary established in the Cayman Islands, the voting rights of

which are wholly owned by SMFG

Type of securities.......

U.S. Dollar denominated Non-cumulative Perpetual Preferred Securities

The preferred securities are not convertible or exchangeable into common stock of SMFG.

Total issue amount ....
Dividends..................
Issue price..................
Use of proceeds..........
Ranking ....................
Method of offering.....
Listing.......................
Issue date...................

$1,800 million
8.75% per annum (fixed rate)
$1,000 per preferred security
To be ultimately provided to SMBC, a banking subsidiary of SMFG, as perpetual subordinated loans
The preferred securities rank, as to liquidation preferences, effectively pari passu with preferred stock of SMFG
Offered in euro market. Also, offered in the U.S. market through private placement to qualified institutional investors.
Singapore Exchange Securities Trading Limited
May 12, 2008

(4) Fractional shares will be eliminated when the electronic share

certificate system is introduced at the same time as the January
2009 implementation of the “Law for Partial Amendment of the
Laws Related to Transfer of Bonds, etc., to Streamline Settlement
with respect to Transactions of Stock, etc.” (Law No. 88 of 2004).
In order to eliminate the fractional shares, SMFG resolved to
execute a 100 for 1 common stock split and adopt a unit share
system, under which the number of shares constituting one unit

will be 100, at the meeting of the Board of Directors held on May
16, 2008, subject to the approval of the amendment of the articles
of incorporation at the 6th ordinary general meeting of
shareholders and the general meeting of holders of class shares with
respect to each class of shares that will be held on June 27, 2008.
If the stock split had been implemented on April 1, 2006, per
share information for the fiscal years ended March 31, 2008 and
2007 would be as follows.

Year ended March 31

Net assets per share ............................................................................................
Net income per share .........................................................................................
Net income per share (diluted) ...........................................................................

Yen

2008

¥ 4,245.46
592.98
566.57

2007

¥4,692.29
570.86
514.94

U.S. dollars
2008

$42.37
5.92
5.65

118

SMFG 2008

39. Parent Company

(1) Nonconsolidated Balance Sheets

Sumitomo Mitsui Financial Group, Inc.

March 31

Assets
Current assets ...........................................................................................
Cash and due from banks.....................................................................
Prepaid expenses .................................................................................
Deferred tax assets ...............................................................................
Accrued income...................................................................................
Accrued income tax refunds.................................................................
Other current assets.............................................................................
Fixed assets...............................................................................................
Tangible fixed assets............................................................................
Buildings .......................................................................................
Equipment .....................................................................................
Intangible fixed assets .........................................................................
Software .........................................................................................
Investments and other assets................................................................
Investments in securities ................................................................
Investments in subsidiaries and affiliates ........................................
Deferred tax assets..........................................................................
Total assets .............................................................................................

Liabilities and net assets
Liabilities

Current liabilities ................................................................................
Short-term borrowings ...................................................................
Accounts payable............................................................................
Accrued expenses............................................................................
Income taxes payable......................................................................
Business office taxes payable...........................................................
Reserve for employee bonuses.........................................................
Reserve for executive bonuses .........................................................
Other current liabilities..................................................................
Fixed liabilities ........................................................................................
Reserve for executive retirement benefits .............................................
Total liabilities .......................................................................................

Net assets
Stockholders’ equity

Capital stock .......................................................................................
Capital surplus ....................................................................................
Capital reserve................................................................................
Other capital surplus......................................................................
Retained earnings................................................................................
Other retained earnings..................................................................
Voluntary reserve ......................................................................
Retained earnings brought forward ...........................................
Treasury stock .....................................................................................
Total stockholders’ equity.....................................................................
Total net assets.......................................................................................
Total liabilities and net assets ...............................................................

Millions of yen

2008

2007

Millions of
U.S. dollars (Note 1)
2008

68,956
53,735
21
359
56
14,267
515
3,952,260
4
0
4
9
9
3,952,246

—

3,950,642
1,603
¥4,021,217

¥1,052,242
1,049,030
223
173
1,539
4
81
74
1,114
225
225
1,052,468

1,420,877
930,386
642,355
288,031
700,679
700,679
30,420
670,259
(83,194)
2,968,749
2,968,749
¥4,021,217

¥ 109,364
37,073
21
265
23
71,377
603
3,850,079
7
0
6
20
20
3,850,052
20
3,847,716
2,315
¥3,959,444

¥ 961,372
959,030
108
48
964
4
83
—

1,132
174
174
961,546

1,420,877
930,469
642,355
288,113
729,129
729,129
30,420
698,709
(82,578)
2,997,898
2,997,898
¥3,959,444

688
536
0
4
1
142
5
39,448
0
0
0
0
0
39,448

—

39,432
16
$40,136

$10,503
10,470
2
2
16
0
1
1
11
2
2
10,505

14,182
9,286
6,411
2,875
6,993
6,993
303
6,690
(830)
29,631
29,631
$40,136

SMFG 2008 119

(2) Nonconsolidated Statements of Income
Sumitomo Mitsui Financial Group, Inc.

Year ended March 31

Operating income ..................................................................................
Dividends on investments in subsidiaries and affiliates ........................
Fees and commissions received from subsidiaries .................................

Operating expenses................................................................................
General and administrative expenses ...................................................
Operating profit .....................................................................................

Non-operating income...........................................................................
Interest income on deposits .................................................................
Fees and commissions income..............................................................
Other non-operating income ...............................................................

Non-operating expenses........................................................................
Interest on borrowings ........................................................................
Amortization of organization costs ......................................................
Fees and commissions expenses............................................................
Losses on devaluation of stocks of affiliate............................................
Other non-operating expenses .............................................................
Ordinary profit.......................................................................................

Income before income taxes .................................................................
Income taxes:

current ...........................................................................................
deferred..........................................................................................
Net income .............................................................................................

Millions of yen

2008

¥111,637
89,693
21,944

6,246
6,246
105,391

466
298
14
153

16,794
11,012

—

1,263
4,518

—

89,063

2007

¥376,479
366,680
9,798

3,641
3,641
372,838

234
213
20
0

8,594
4,311
301
3,978

—
3
364,477

89,063

364,477

Millions of
U.S. dollars (Note 1)
2008

$1,114
895
219

62
62
1,052

5
3
0
2

168
110
—
13
45
—
889

889

5,470
618
¥ 82,975

2,918
(1,975)
¥363,535

55
6
$ 828

Yen

2008

2007

U.S. dollars (Note 1)
2008

Per share data:

Net income.......................................................................................................
Net income — diluted......................................................................................

¥9,134.13
9,133.76

¥46,326.41
41,973.46

$91.17
91.16

120

SMFG 2008

(3) Nonconsolidated Statements of Changes in Net Assets

Sumitomo Mitsui Financial Group, Inc.

Capital surplus

Millions of yen

Stockholders’ equity

Retained earnings

Other retained earnings

Year ended March 31, 2008

Capital
stock

Capital
reserve

Other
capital
surplus

Total
capital
surplus

Voluntary
reserve

Retained
earnings brought
forward

Total
retained
earnings

Treasury
stock

Total
stockholders’
equity

Total
net assets

Balance at March 31, 2007..........................

¥1,420,877

¥642,355

¥288,113

¥930,469

¥30,420

¥ 698,709

¥ 729,129

¥(82,578)

¥2,997,898

Changes in the year

Cash dividends ..............................................

Net income ...................................................

Acquisition of own shares ..............................

Disposal of treasury shares .............................

Net changes in the year .................................

—

(111,425)

82,975

(82)

—

(28,450)

(111,425)

82,975

(901)

202

(901)

202

(29,149)

(901)

285

(616)

Balance at March 31, 2008..........................

¥1,420,877

¥642,355

¥288,031

¥930,386

¥30,420

¥ 670,259

¥ 700,679

¥(83,194)

¥2,968,749

Capital surplus

Millions of yen

Stockholders’ equity

Retained earnings

Other retained earnings

Year ended March 31, 2007

Capital
stock

Capital
reserve

Other
capital
surplus

Total
capital
surplus

Voluntary
reserve

Retained
earnings brought
forward

Total
retained
earnings

Treasury
stock

Total
stockholders’
equity

Total
net assets

Balance at March 31, 2006..........................

¥1,420,877

¥1,420,989

¥ 684,406

¥ 2,105,396

¥30,420

¥383,126

¥413,546

(4,393)

¥3,935,426

¥ 3,935,426

Changes in the year

Transfer of capital reserve to other capital surplus ...

(1,000,000)

1,000,000

Increase due to exchange of shares..................

221,365

—

221,365

Cash dividends ..............................................

Net income ...................................................

Acquisition of own shares ..............................

Disposal of treasury shares .............................

Retirement of treasury shares.........................

(15)

(1,396,277)

(47,951)

363,535

(47,951)

363,535

—

221,365

(47,951)

363,535

221,365

(47,951)

363,535

(1,474,644)

182

1,396,277

167

—

167

—

Net changes in the year .................................

—

(778,634)

(396,292)

(1,174,927)

—

315,583

(78,184)

(937,527)

Balance at March 31, 2007..........................

¥1,420,877

¥ 642,355

¥ 288,113

¥ 930,469

¥30,420

¥698,709

¥729,129

¥ (82,578)

¥2,997,898

¥ 2,997,898

Capital surplus

Millions of U.S. dollars (Note 1)

Stockholders’ equity

Retained earnings

Other retained earnings

Year ended March 31, 2008

Capital
stock

Capital
reserve

Other
capital
surplus

Total
capital
surplus

Voluntary
reserve

Retained
earnings brought
forward

Total
retained
earnings

Treasury
stock

Total
stockholders’
equity

Total
net assets

Balance at March 31, 2007..........................

$14,182

$6,411

$2,876

$9,287

$303

$ 6,974

$ 7,277

$(824)

$29,922

Changes in the year

Cash dividends ..............................................

Net income ...................................................

Acquisition of own shares ..............................

Disposal of treasury shares .............................

Net changes in the year .................................

—

(1)

Balance at March 31, 2008..........................

$14,182

$6,411

$2,875

$9,286

(1,112)

828

(1,112)

828

—

$303

(284)

$ 6,690

(284)

$ 6,993

(1,112)

828

(9)

(291)

(1,112)

828

(9)

(291)

(9)

(6)

$(830)

$29,631

SMFG 2008 121

Independent Auditors’ Report

To the Board of Directors of
Sumitomo Mitsui Financial Group, Inc.

We have audited the accompanying consolidated balance sheets of Sumitomo Mitsui Financial Group, Inc. (“SMFG”)
and consolidated subsidiaries as of March 31, 2008 and 2007, and the related consolidated statements of income,
changes in net assets and cash flows for the years then ended, expressed in Japanese yen. These consolidated financial
statements are the responsibility of SMFG’s management. Our responsibility is to independently express an opinion
on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of SMFG and subsidiaries as of March 31, 2008 and 2007, and the consolidated results
of their operations and their cash flows for the years then ended, in conformity with accounting principles generally
accepted in Japan.

As discussed in Note 38 to the consolidated financial statements,

1. SMFG resolved at the meeting of the Board of Directors held on April 28, 2008 to authorize the redemption in

full of the preferred securities issued by an overseas special purpose subsidiary.

2. SMFG resolved at the meeting of the Board of Directors held on April 28, 2008 to establish overseas special

purpose subsidiaries and to issue preferred securities through the subsidiaries on May 12, 2008.

The consolidated financial statements as of and for the year ended March 31, 2008 have been translated into United
States dollars solely for convenience of the readers. We have recomputed the translation, and in our opinion, the
consolidated financial statements expressed in Japanese yen have been translated into United States dollars on the
basis set forth in Note 1 to the consolidated financial statements.

Tokyo, Japan
June 27, 2008

122

SMFG 2008

Supplemental Information

Consolidated Balance Sheets (Unaudited)
Sumitomo Mitsui Banking Corporation and Subsidiaries

March 31

Assets
Cash and due from banks...................................................................................
Deposits with banks ............................................................................................
Call loans and bills bought ..................................................................................
Receivables under resale agreements ...............................................................
Receivables under securities borrowing transactions.........................................
Commercial paper and other debt purchased.....................................................
Trading assets ....................................................................................................
Money held in trust..............................................................................................
Securities ............................................................................................................
Loans and bills discounted..................................................................................
Foreign exchanges .............................................................................................
Other assets........................................................................................................
Tangible fixed assets ..........................................................................................
Intangible fixed assets ........................................................................................
Lease assets.......................................................................................................
Deferred tax assets.............................................................................................
Customers’ liabilities for acceptances and guarantees.......................................
Reserve for possible loan losses ........................................................................
Total assets .......................................................................................................

Millions of yen

2008

2007

2,720,542
2,226,977
570,802
357,075
1,940,170
1,091,663
4,081,480
7,329
23,160,903
62,972,601
893,567
3,024,123
756,449
125,013
27,125
920,834
4,609,160
(848,031)
¥ 108,637,791

¥ 1,907,823
2,046,199
1,102,078
76,551
2,276,894
960,591
3,262,341
2,924
20,304,639
59,617,850
881,436
1,630,049
755,891
101,219
26,922
804,627
3,673,396
(860,799)
¥ 98,570,638

Millions of
U.S. dollars

2008

27,154
22,227
5,697
3,564
19,365
10,896
40,737
73
231,170
628,532
8,919
30,184
7,550
1,248
271
9,191
46,004
(8,464)
$1,084,318

SMFG 2008 123

(Continued)

March 31

Liabilities and net assets
Liabilities
Deposits ..............................................................................................................
Call money and bills sold ....................................................................................
Payables under repurchase agreements ............................................................
Payables under securities lending transactions..................................................
Trading liabilities .................................................................................................
Borrowed money.................................................................................................
Foreign exchanges .............................................................................................
Short-term bonds ................................................................................................
Bonds..................................................................................................................
Due to trust account............................................................................................
Other liabilities ....................................................................................................
Reserve for employee bonuses ..........................................................................
Reserve for executive bonuses...........................................................................
Reserve for employee retirement benefits ..........................................................
Reserve for executive retirement benefits ..........................................................
Reserve for reimbursement of deposits ..............................................................
Other reserves ....................................................................................................
Deferred tax liabilities..........................................................................................
Deferred tax liabilities for land revaluation ..........................................................
Acceptances and guarantees .............................................................................
Total liabilities ...................................................................................................

Net assets
Capital stock .......................................................................................................
Capital surplus ....................................................................................................
Retained earnings...............................................................................................
Total stockholders’ equity ...............................................................................
Net unrealized gains on other securities.............................................................
Net deferred losses on hedges ...........................................................................
Land revaluation excess .....................................................................................
Foreign currency translation adjustments ...........................................................
Total valuation and translation adjustments..................................................
Stock acquisition rights .......................................................................................
Minority interests.................................................................................................
Total net assets.................................................................................................
Total liabilities and net assets .........................................................................

Millions of yen

2008

2007

¥ 75,892,384
2,653,142
1,828,672
5,732,042
2,671,554
2,742,166
301,123
—
3,804,208
80,796
3,087,166
20,427
688
17,084
6,695
10,417
0
51,868
47,446
4,609,160
103,557,043

664,986
1,603,512
861,508
3,130,008
558,013
(74,990)
34,844
(28,468)
489,398
43
1,461,297
5,080,747
¥108,637,791

¥74,826,561
2,286,698
140,654
1,516,342
1,941,142
2,034,633
323,890
3,500
3,929,325
65,062
2,279,167
18,919
—
13,382
6,233
—
18
49,714
49,536
3,673,396
93,158,180

664,986
1,603,512
581,619
2,850,119
1,269,385
(87,571)
37,526
(37,194)
1,182,145
14
1,380,179
5,412,458
¥98,570,638

Millions of
U.S. dollars

2008

$ 757,485
26,481
18,252
57,212
26,665
27,370
3,005
—
37,970
806
30,813
204
7
170
67
104
0
518
474
46,004
1,033,607

6,637
16,005
8,599
31,241
5,570
(749)
348
(284)
4,885
0
14,585
50,711
$1,084,318

Notes: 1. Amounts less than one million yen have been omitted.

2. For the convenience of the readers, the accompanying U.S. dollar financial statements have been translated from Japanese yen, as a matter of

arithmetical computation only, at the rate of ¥100.19 to US$1, the exchange rate prevailing at March 31, 2008.

124

SMFG 2008

Consolidated Statements of Income (Unaudited)
Sumitomo Mitsui Banking Corporation and Subsidiaries

Year ended March 31

Income
Interest income:

Interest on loans and discounts .....................................................................
Interest and dividends on securities ..............................................................
Interest on receivables under resale agreements..........................................
Interest on receivables under securities borrowing transactions ...................
Interest on deposits with banks .....................................................................
Other interest income ....................................................................................
Trust fees ............................................................................................................
Fees and commissions .......................................................................................
Trading profits .....................................................................................................
Other operating income ......................................................................................
Other income ......................................................................................................
Total income......................................................................................................

Expenses
Interest expenses:

Interest on deposits .......................................................................................
Interest on borrowings and rediscounts .........................................................
Interest on payables under repurchase agreements .....................................
Interest on payables under securities lending transactions ...........................
Interest on bonds and short-term bonds ........................................................
Other interest expenses.................................................................................
Fees and commissions .......................................................................................
Trading losses.....................................................................................................
Other operating expenses...................................................................................
General and administrative expenses.................................................................
Provision for reserve for possible loan losses.....................................................
Other expenses...................................................................................................
Total expenses ..................................................................................................
Income before income taxes and minority interests .....................................
Income taxes:

Millions of yen

2008

2007

Millions of
U.S. dollars

2008

¥1,564,343
333,692
7,044
7,032
100,826
109,692
3,710
550,053
449,141
227,270
64,803
3,417,611

547,205
57,306
7,384
45,499
89,279
166,975
117,869
—
461,276
821,897
56,364
320,546
2,691,606
726,004

¥1,377,189
369,548
7,098
4,857
96,700
94,840
3,482
577,435
118,589
197,172
124,779
2,971,693

500,904
41,320
18,353
60,856
88,353
86,996
111,413
1,936
236,292
768,498
19,940
286,105
2,220,971
750,722

40,791
265,384
68,007
¥ 351,820

47,601
238,764
62,561
¥ 401,795

$15,614
3,331
70
70
1,006
1,095
37
5,490
4,483
2,268
647
34,111

5,462
572
74
454
891
1,667
1,176
—
4,604
8,203
563
3,199
26,865
7,246

407
2,649
678
$ 3,512

Per share data:

Net income.....................................................................................................
Net income — diluted ....................................................................................

¥6,132.91
6,132.75

¥7,072.09
7,012.46

$61.21
61.21

Yen

U.S. dollars

Notes: 1. Amounts less than one million yen have been omitted.

2. For the convenience of the readers, the accompanying U.S. dollar financial statements have been translated from Japanese yen, as a matter of

arithmetical computation only, at the rate of ¥100.19 to US$1, the exchange rate prevailing at March 31, 2008.

SMFG 2008 125

Nonconsolidated Balance Sheets (Unaudited)
Sumitomo Mitsui Banking Corporation

March 31

Assets
Cash and due from banks...................................................................................
Deposits with banks ............................................................................................
Call loans and bills bought ..................................................................................
Receivables under resale agreements ...............................................................
Receivables under securities borrowing transactions.........................................
Commercial paper and other debt purchased.....................................................
Trading assets ....................................................................................................
Money held in trust..............................................................................................
Securities ............................................................................................................
Loans and bills discounted..................................................................................
Foreign exchanges .............................................................................................
Other assets........................................................................................................
Tangible fixed assets ..........................................................................................
Intangible fixed assets ........................................................................................
Deferred tax assets.............................................................................................
Customers’ liabilities for acceptances and guarantees.......................................
Reserve for possible loan losses ........................................................................
Reserve for possible losses on investments.......................................................
Total assets .......................................................................................................

Liabilities and net assets/stockholders’ equity
Liabilities
Deposits ..............................................................................................................
Call money and bills sold ....................................................................................
Payables under repurchase agreements ............................................................
Payables under securities lending transactions..................................................
Trading liabilities .................................................................................................
Borrowed money.................................................................................................
Foreign exchanges .............................................................................................
Bonds..................................................................................................................
Due to trust account............................................................................................
Other liabilities ....................................................................................................
Reserve for employee bonuses ..........................................................................
Reserve for executive bonuses...........................................................................
Reserve for executive retirement benefits ..........................................................
Reserve for point service program......................................................................
Reserve for reimbursement of deposits ..............................................................
Other reserves ....................................................................................................
Deferred tax liabilities for land revaluation ..........................................................
Acceptances and guarantees .............................................................................
Total liabilities ...................................................................................................

Net assets
Capital stock .......................................................................................................
Capital surplus ....................................................................................................
Retained earnings...............................................................................................
Total stockholders’ equity ...............................................................................
Net unrealized gains on other securities.............................................................
Net deferred losses on hedges ...........................................................................
Land revaluation excess .....................................................................................
Total valuation and translation adjustments..................................................
Total net assets.................................................................................................
Total liabilities and net assets .........................................................................

Notes: 1. Amounts less than one million yen have been omitted.

Millions of yen

2008

2007

Millions of
U.S. dollars

2008

¥ 2,526,553
2,421,977
374,083
328,544
1,900,294
447,538
3,638,676
7,329
22,758,241
56,957,813
836,917
2,196,999
676,072
106,469
823,251
4,665,062
(620,004)
(12,801)
¥100,033,020

¥ 69,382,834
2,656,142
1,825,481
5,732,042
2,307,304
3,798,333
301,958
3,539,110
80,796
2,178,263
8,857
496
4,800
1,870
9,587
0
46,827
4,665,062
96,539,771

664,986
1,367,548
894,839
2,927,374
558,103
(13,787)
21,558
565,874
3,493,249
¥100,033,020

¥ 1,734,199
2,265,361
1,006,657
39,725
2,213,314
333,524
2,914,023
2,924
20,060,873
53,756,440
835,617
1,442,066
678,581
87,615
743,605
4,177,816
(677,573)
(77,547)
¥ 91,537,228

¥ 68,809,338
2,291,128
104,640
1,516,342
1,578,730
3,371,846
329,695
3,647,483
65,062
1,588,683
8,892
—
4,757
990
—
18
48,917
4,177,816
87,544,344

664,986
1,367,548
761,028
2,793,563
1,259,814
(84,733)
24,240
1,199,320
3,992,884
¥ 91,537,228

$ 25,217
24,174
3,734
3,279
18,967
4,467
36,318
73
227,151
568,498
8,353
21,928
6,748
1,063
8,217
46,562
(6,188)
(128)
$998,433

$692,513
26,511
18,220
57,212
23,029
37,911
3,014
35,324
807
21,741
88
5
48
19
96
0
467
46,562
963,567

6,637
13,650
8,931
29,218
5,571
(138)
215
5,648
34,866
$998,433

2. For the convenience of the readers, the accompanying U.S. dollar financial statements have been translated from Japanese yen, as a matter of

arithmetical computation only, at the rate of ¥100.19 to US$1, the exchange rate prevailing at March 31, 2008.

126

SMFG 2008

Nonconsolidated Statements of Income (Unaudited)
Sumitomo Mitsui Banking Corporation

Year ended March 31

Income
Interest income:

Interest on loans and discounts .....................................................................
Interest and dividends on securities ..............................................................
Interest on receivables under resale agreements..........................................
Interest on receivables under securities borrowing transactions ...................
Interest on deposits with banks .....................................................................
Other interest income ....................................................................................
Trust fees ............................................................................................................
Fees and commissions .......................................................................................
Trading profits .....................................................................................................
Other operating income ......................................................................................
Other income ......................................................................................................
Total income......................................................................................................

Expenses
Interest expenses:

Interest on deposits .......................................................................................
Interest on borrowings and rediscounts .........................................................
Interest on payables under repurchase agreements .....................................
Interest on payables under securities lending transactions ...........................
Interest on bonds ...........................................................................................
Other interest expenses.................................................................................
Fees and commissions .......................................................................................
Trading losses.....................................................................................................
Other operating expenses...................................................................................
General and administrative expenses.................................................................
Provision for reserve for possible loan losses.....................................................
Other expenses...................................................................................................
Total expenses ..................................................................................................
Income before income taxes............................................................................
Income taxes:

Current ...........................................................................................................
Deferred .........................................................................................................
Net income.........................................................................................................

Millions of yen

2008

2007

Millions of
U.S. dollars

2008

¥ 1,346,282
322,287
3,762
6,955
92,946
94,042
3,710
452,527
440,985
121,812
59,364
2,944,677

474,314
126,925
6,189
45,496
76,463
166,080
120,165
—
384,906
659,992
—
376,689
2,437,222
507,454

¥1,166,967
369,039
4,064
4,827
77,722
83,548
3,482
465,171
103,719
106,725
107,309
2,492,577

430,045
103,090
16,523
60,770
73,483
84,809
111,754
2,098
158,207
609,816
450
254,598
1,905,648
586,928

16,031
285,680
¥ 205,742

16,507
254,680
¥ 315,740

$13,437
3,217
38
69
928
939
37
4,517
4,401
1,216
592
29,391

4,734
1,267
62
454
763
1,658
1,199
—
3,842
6,587
—
3,760
24,326
5,065

160
2,851
$ 2,054

Per share data:
Net income..........................................................................................................
Net income — diluted..........................................................................................

¥ 3,540.84
—

¥5,533.69
5,487.21

$ 35.34
—

Yen

U.S. dollars

Notes: 1. Amounts less than one million yen have been omitted.

2. For the convenience of the readers, the accompanying U.S. dollar financial statements have been translated from Japanese yen, as a matter of

arithmetical computation only, at the rate of ¥100.19 to US$1, the exchange rate prevailing at March 31, 2008.

SMFG 2008 127

Income Analysis (Consolidated)

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Operating Income, Classified by Domestic and Overseas Operations

2008

2007

Millions of yen

Year ended March 31

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

Interest income ............................................
Interest expenses.........................................
Net interest income ............................................
Trust fees ...........................................................
Fees and commissions (income) .................
Fees and commissions (expenses) ............
Net fees and commissions.................................
Trading profits ..............................................
Trading losses..............................................
Net trading income.............................................
Other operating income ...............................
Other operating expenses............................
Net other operating income (expenses).............

¥ 1,542,313
529,520
1,012,792
3,752
633,655
82,800
550,855
470,388
15,242
455,145
1,165,090
1,362,029
(196,938)

¥ 669,690
457,127
212,562
—
71,996
10,537
61,459
30,848
16,423
14,425
47,612
30,081
17,530

¥ (66,551)
(51,591)
(14,960)
—
(1,368)
(1,047)
(320)
(31,665)
(31,665)
—
(67)
(21)
(45)

¥ 2,145,451
935,056
1,210,394
3,752
704,283
92,289
611,993
469,571
—
469,571
1,212,635
1,392,089
(179,453)

¥1,441,457
432,558
1,008,898
3,508
647,473
89,805
557,668
127,667
10,720
116,946
981,643
988,511
(6,868)

¥593,892
409,364
184,528
—
59,223
7,353
51,870
21,459
12,780
8,679
22,977
16,052
6,924

¥ (56,280)
(31,450)
(24,829)
—
(698)
(345)
(352)
(21,564)
(21,564)
—
(988)
(193)
(794)

¥ 1,979,069
810,471
1,168,597
3,508
705,998
96,812
609,185
127,561
1,936
125,625
1,003,632
1,004,370
(738)

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking
subsidiaries and overseas consolidated subsidiaries.

2. Income and expenses resulting from money held in trust are included in “Other income” and “Other expenses.” Therefore, “Interest expenses” are

shown after deduction of expenses (2008, ¥10 million; 2007, ¥5 million) related to the management of money held in trust.

3. Intersegment transactions are reported in the “Elimination” column.

Average Balance, Interest and Earnings Yield of Interest-Earning Assets and Interest-Bearing Liabilities
Domestic Operations

Year ended March 31

Average balance

Interest-earning assets.............................
Loans and bills discounted ..................
Securities.............................................
Call loans and bills bought .................
Receivables under resale agreements....
Receivables under securities

¥ 74,364,561
51,170,802
18,046,377
644,293
67,129

2008
Interest

¥ 1,542,313
1,135,110
287,879
13,186
382

borrowing transactions .....................
Deposits with banks ............................

980,818
1,891,531

7,032
34,957

Interest-bearing liabilities..........................
Deposits .............................................
Negotiable certificates of deposit ........
Call money and bills sold.....................
Payables under repurchase agreements...
Payables under securities

lending transactions ........................
Commercial paper ...............................
Borrowed money .................................
Short-term bonds ................................
Bonds ..................................................

¥ 81,183,731
65,494,311
2,557,627
2,087,888
103,567

¥ 529,520
244,013
15,057
10,853
601

2,041,013
—
4,400,327
494,241
3,726,666

45,499
—
75,888
4,105
73,497

Millions of yen

Earnings yield

Average balance

2007
Interest

¥ 1,441,457
1,004,005
330,791
17,383
94

¥ 76,132,613
51,620,802
19,820,864
784,972
41,945

1,329,318
1,054,974

4,857
26,901

¥ 80,928,373
65,159,829
2,365,296
2,908,959
157,722

¥ 432,558
177,510
5,858
4,286
431

2,301,547
712
3,530,322
370,939
3,784,043

60,856
1
53,287
1,503
68,789

Earnings yield

1.89%
1.94
1.67
2.21
0.23

0.37
2.55

0.53%
0.27
0.25
0.15
0.27

2.64
0.24
1.51
0.41
1.82

2.07%
2.22
1.60
2.05
0.57

0.72
1.85

0.65%
0.37
0.59
0.52
0.58

2.23
—
1.72
0.83
1.97

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries.

2. In principle, average balances are calculated by using daily balances. However, some domestic consolidated subsidiaries use weekly, monthly or

semiannual balances instead.

3. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥804,987 million; 2007,

¥1,096,906 million).

4. Income and expenses resulting from money held in trust are included in “Other income” and “Other expenses.” Therefore, “Interest-earning assets”
are shown after deduction of the average balance of money held in trust (2008, ¥2,771 million; 2007, ¥2,607 million). “Interest-bearing liabilities” are
shown after deduction of amounts equivalent to the average balance of money held in trust (2008, ¥2,771 million; 2007, ¥2,607 million) and
corresponding interest (2008, ¥10 million; 2007, ¥5 million).

128

SMFG 2008

Overseas Operations

Year ended March 31

Average balance

¥12,801,800
8,859,850
1,139,851
268,662
278,935

2008
Interest

¥ 669,690
467,419
62,162
12,827
6,661

borrowing transactions .....................
Deposits with banks ............................

—
1,850,524

—
71,221

¥ 8,952,948
7,101,518
660,930
314,091
207,412

—
—
316,935
—
268,000

¥ 457,127
256,776
36,045
12,675
6,802

—
—
18,465
—
17,447

Millions of yen

Earnings yield

Average balance

5.23%
5.28
5.45
4.77
2.39

—
3.85

5.11%
3.62
5.45
4.04
3.28

—
—
5.83
—
6.51

¥11,234,586
7,838,766
1,109,300
200,194
145,659

—
1,530,875

¥ 8,996,910
6,985,307
738,076
325,729
352,703

—
—
159,086
—
348,240

2007
Interest

¥593,892
401,333
62,710
10,824
7,003

—
72,925

¥409,364
282,707
37,618
14,520
17,923

—
—
7,199
—
20,930

Earnings yield

5.29%
5.12
5.65
5.41
4.81

—
4.76

4.55%
4.05
5.10
4.46
5.08

—
—
4.53
—
6.01

Notes: 1. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated

subsidiaries.

2. In principle, average balances are calculated by using daily balances. However, some overseas consolidated subsidiaries use weekly, monthly or

semiannual balances instead.

3. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥75,496 million; 2007, ¥48,701 million).

Total of Domestic and Overseas Operations

Year ended March 31

Average balance

¥86,343,910
59,129,159
19,485,192
912,955
346,065

2008
Interest

¥ 2,145,451
1,557,823
333,255
26,014
7,044

borrowing transactions .....................
Deposits with banks ............................

980,818
3,523,849

7,032
101,120

¥89,014,453
72,376,887
3,218,557
2,401,980
310,979

¥ 935,056
495,690
51,103
23,529
7,404

2,041,013
—
3,815,693
494,241
3,994,667

45,499
—
47,862
4,105
90,945

Millions of yen

Earnings yield

Average balance

2007
Interest

¥1,979,069
1,375,851
369,770
28,208
7,098

¥86,851,328
58,785,489
21,188,587
985,167
187,604

1,329,318
2,487,172

4,857
96,763

¥89,150,368
72,045,922
3,103,373
3,234,688
510,425

¥ 810,471
457,078
43,476
18,807
18,354

2,301,547
712
3,015,247
370,939
4,132,284

60,856
1
32,175
1,503
89,719

Earnings yield

2.28%
2.34
1.75
2.86
3.78

0.37
3.89

0.91%
0.63
1.40
0.58
3.60

2.64
0.24
1.07
0.41
2.17

2.48%
2.63
1.71
2.85
2.04

0.72
2.87

1.05%
0.68
1.59
0.98
2.38

2.23
—
1.25
0.83
2.28

Notes: 1. The figures above comprise totals for domestic and overseas operations after intersegment eliminations.

2. In principle, average balances are calculated by using daily balances. However, some consolidated subsidiaries use weekly, monthly or semiannual

balances instead.

3. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥881,666 million; 2007, ¥1,146,135

million).

SMFG 2008 129

Fees and Commissions

2008

2007

Millions of yen

Year ended March 31

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

Fees and commissions (income) .......................
Deposits and loans ......................................
Remittances and transfers ...........................
Securities-related business..........................
Agency .........................................................
Safe deposits ...............................................
Guarantees ..................................................
Credit card ...................................................

¥633,655
24,604
125,254
35,060
16,028
7,140
43,376
128,575

¥ 71,996
49,217
8,568
58
—
4
4,150
—

¥(1,368)
—
(177)
—
—
—
(410)
—

¥ 704,283
73,822
133,645
35,118
16,028
7,144
47,117
128,575

¥647,473
25,034
123,671
48,378
16,581
7,317
45,102
117,197

¥59,223
40,664
9,166
271
—
4
1,266
—

¥ (698)
—
(1)
—
—
0
(407)
—

¥ 705,998
65,698
132,836
48,650
16,581
7,322
45,961
117,197

Fees and commissions (expenses) ...................
Remittances and transfers ...........................

¥ 82,800
26,683

¥ 10,537
5,103

¥(1,047)
(174)

¥ 92,289
31,612

¥ 89,805
25,135

¥ 7,353
2,262

¥ (345)
(198)

¥ 96,812
27,200

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking
subsidiaries and overseas consolidated subsidiaries.

2. Intersegment transactions are reported in “Elimination” column.

Trading Income

Year ended March 31

Trading profits ....................................................
Gains on trading securities ..........................
Gains on securities related to

trading transactions...................................

Gains on trading-related

2008

2007

Millions of yen

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

¥470,388
21,082

¥ 30,848
324

¥ (31,665)
—

¥469,571
21,406

¥127,667
15,071

¥ 21,459
37

¥ (21,564)
—

¥127,561
15,109

2,705

228

—

2,934

—

financial derivatives...................................
Others ..........................................................

439,734
6,865

30,296
—

(31,665)
—

438,365
6,865

109,351
3,244

21,422
—

(21,564)
—

109,208
3,244

Trading losses ...................................................
Losses on trading securities ........................
Losses on securities related to

¥ 15,242
—

¥ 16,423
—

¥ (31,665)
—

trading transactions...................................

—

Losses on trading-related

financial derivatives...................................
Others ..........................................................

15,242
—

16,423
—

(31,665)
—

—
—

—

—
—

¥ 10,720
—

¥12,780
—

¥ (21,564)
—

1,936
—

1,928

8,791
—

—

1,936

12,773
—

(21,564)
—

—
—

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking
subsidiaries and overseas consolidated subsidiaries.

2. Intersegment transactions are reported in the “Elimination” column.

130

SMFG 2008

Assets and Liabilities (Consolidated)

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Deposits and Negotiable Certificates of Deposit
Year-End Balance

March 31

Domestic operations:

Liquid deposits ...............................................................................................
Fixed-term deposits .......................................................................................
Others ............................................................................................................
Subtotal..........................................................................................................
Negotiable certificates of deposit ...................................................................
Total ...............................................................................................................

Overseas operations:

Millions of yen

2008

2007

¥40,874,881
21,905,957
4,066,787
66,847,626
2,261,006
¥69,108,632

¥ 4,608,327
1,227,876
6,793
5,842,997
817,143
¥ 6,660,140
¥75,768,773

¥41,266,689
21,273,509
3,271,453
65,811,653
1,883,747
¥67,695,400

¥ 5,330,090
1,006,239
8,241
6,344,570
705,470
¥ 7,050,041
¥74,745,441

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking
subsidiaries and overseas consolidated subsidiaries.

2. Liquid deposits = Current deposits + Ordinary deposits + Savings deposits + Deposits at notice
3. Fixed-term deposits = Time deposits + Installment savings

Balance of Loan Portfolio, Classified by Industry
Year-End Balance

March 31

Domestic operations:

Millions of yen

2008

2007

Manufacturing ................................................................................................
Agriculture, forestry, fisheries and mining......................................................
Construction...................................................................................................
Transportation, communications and public enterprises ...............................
Wholesale and retail ......................................................................................
Finance and insurance ..................................................................................
Real estate.....................................................................................................
Services .........................................................................................................
Municipalities .................................................................................................
Others ............................................................................................................
Subtotal..........................................................................................................

Overseas operations:

Public sector ..................................................................................................
Financial institutions ......................................................................................
Commerce and industry.................................................................................
Others ............................................................................................................
Subtotal..........................................................................................................
Total ....................................................................................................................

¥ 5,695,551
146,244
1,360,402
3,061,792
5,343,724
4,469,767
7,790,969
5,924,091
846,982
18,047,914
¥ 52,687,441

32,848
621,385
7,862,965
940,234
¥ 9,457,433
¥ 62,144,874

10.81%
0.28
2.58
5.81
10.14
8.48
14.79
11.24
1.61
34.26
100.00%

0.35%
6.57
83.14
9.94
100.00%

—

¥ 5,598,883
139,509
1,435,589
3,038,681
5,507,322
4,189,606
7,630,563
6,238,878
648,704
17,216,194
¥ 51,643,934

35,783
481,228
5,950,135
578,240
¥ 7,045,387
¥ 58,689,322

10.84%
0.27
2.78
5.88
10.66
8.11
14.78
12.08
1.26
33.34
100.00%

0.51%
6.83
84.45
8.21
100.00%

—

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking
subsidiaries and overseas consolidated subsidiaries.

2. Japan offshore banking accounts are included in overseas operations’ accounts.

SMFG 2008 131

Reserve for possible loan losses

March 31

General reserve ..................................................................................................
Specific reserve ..................................................................................................
Loan loss reserve for specific overseas countries ..............................................
Reserve for possible loan losses ........................................................................

Amount of direct reduction ..................................................................................

Risk-Monitored Loans

March 31

Bankrupt loans ....................................................................................................
Non-accrual loans ...............................................................................................
Past due loans (3 months or more).....................................................................
Restructured loans..............................................................................................
Total ....................................................................................................................

Amount of direct reduction ..................................................................................

Notes: Definition of risk-monitored loan categories

Millions of yen

2008

¥ 593,714
300,987
0
¥ 894,702

¥ 518,594

2008

73,472
607,226
26,625
385,336
¥ 1,092,661

¥ 433,447

2007

¥ 683,589
203,562
1,941
¥ 889,093

¥ 490,123

2007

60,715
507,289
22,018
477,362
¥1,067,386

¥ 430,335

1. Bankrupt loans: Credits for which accrued interest is not accounted in revenue; credits extended to borrowers that are undergoing bankruptcy,

corporate reorganization and rehabilitation proceedings or debtors receiving orders of disposition by suspension of business at bill clearinghouses

2. Non-accrual loans: Credits for which accrued interest is not accounted in revenue; credits, excluding loans to bankrupt borrowers and loans with

grace for interest payment to assist in corporate reorganization or to support business

3. Past due loans (3 months or more): Loans with payment of principal or interest in arrears for more than 3 months, calculated from the day following

the contractual due date, excluding borrowers in categories 1. and 2.

4. Restructured loans: Loans to borrowers in severe financial condition given certain favorable terms and conditions to assist in corporate rehabilitation

or to support business, excluding borrowers in categories 1. through 3.

Problem Assets Based on the Financial Reconstruction Law

March 31

Bankrupt and quasi-bankrupt assets ..................................................................
Doubtful assets ...................................................................................................
Substandard loans ..............................................................................................
Total of problem assets.......................................................................................
Normal assets .....................................................................................................
Total ....................................................................................................................

2008

206,634
507,167
418,841
1,132,643
69,001,954
¥70,134,597

Amount of direct reduction ..................................................................................

518,594

2007

193,792
384,817
506,024
1,084,632
64,815,607
¥65,900,240

490,123

Millions of yen

Note: Definition of problem asset categories

1. Bankrupt and quasi-bankrupt assets: Credits to borrowers undergoing bankruptcy, corporate reorganization, and rehabilitation proceedings, as well

as claims of a similar nature

2. Doubtful assets: Credits for which final collection of principal and interest in line with original agreements is highly improbable due to deterioration of

financial position and business performance, but not insolvency of the borrower

3. Substandard loans: Past due loans (3 months or more) and restructured loans, excluding 1. and 2.
4. Normal assets: Credits to borrowers with good business performance and in financial standing without identified problems and not classified into the

three categories above

132

SMFG 2008

Securities
Year-End Balance

March 31

Domestic operations:

Millions of yen

2008

2007

Overseas operations:

Unallocated corporate assets:

Japanese government bonds ........................................................................
Japanese local government bonds ...............................................................
Japanese corporate bonds ...........................................................................
Japanese stocks ...........................................................................................
Others ...........................................................................................................
Subtotal..........................................................................................................
Total ....................................................................................................................

¥ 9,339,978
439,228
3,880,773
3,492,468
4,236,572
¥ 21,389,021

—
—
—
—
¥ 1,871,186
¥ 1,871,186

—
—
—
257,294
—
¥
257,294
¥ 23,517,501

¥ 7,640,069
571,103
4,066,497
4,468,620
2,306,641
¥19,052,932

—
—
—
—
1,205,587
¥ 1,205,587

—
—
—
278,980
—
¥
278,980
¥20,537,500

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking
subsidiaries and overseas consolidated subsidiaries.

2. “Others” include foreign bonds and foreign stocks.

Trading Assets and Liabilities

March 31

Trading assets: ..................................................
Trading securities ........................................
Derivatives of trading securities ...................
Securities related to trading transactions.....
Derivatives of securities related to

2008

2007

Millions of yen

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

¥ 3,664,024
223,360
3,043
—

¥ 490,723
7,082
—
—

¥ (31,135)
—
—
—

¥ 4,123,611
230,442
3,043
—

¥2,906,229
27,932
373
—

¥397,304
25,355
—
—

¥ (25,647)
—
—
—

¥3,277,885
53,288
373
—

trading transactions ..................................
Trading-related financial derivatives ............
Other trading assets ....................................

10,440
2,542,809
884,370

—
483,640
—

—
(31,135)
—

10,440
2,995,314
884,370

2,344
1,778,913
1,096,664

—
371,949
—

—
(25,647)
—

2,344
2,125,214
1,096,664

Trading liabilities: ..............................................
Trading securities sold for short sales .........
Derivatives of trading securities ...................
Securities related to trading transactions.....
Derivatives of securities related to

¥ 2,310,732
19,312
3,881
—

¥ 391,720
733
—
—

¥ (31,135)
—
—
—

¥ 2,671,316
20,046
3,881
—

¥1,572,595
12,065
288
—

¥396,026
4,349
—
—

¥ (25,647)
—
—
—

¥1,942,973
16,415
288
—

trading transactions ..................................
Trading-related financial derivatives ............
Other trading liabilities .................................

10,196
2,277,341
—

—
390,986
—

—
(31,135)
—

10,196
2,637,192
—

1,975
1,558,265
—

—
391,676
—

—
(25,647)
—

1,975
1,924,294
—

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other

domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking
subsidiaries and overseas consolidated subsidiaries.

2. Intersegment transactions are reported in the “Elimination” column.

SMFG 2008 133

Capital (Nonconsolidated)

Sumitomo Mitsui Financial Group, Inc.

Change in Number of Shares Issued and Capital Stock

April 1, 2003 — March 31, 2004*1........
August 8, 2003*2 ..................................
April 1, 2004 — March 31, 2005*3........
March 29, 2005*4..................................
April 1, 2005 — March 31, 2006*5........
January 31, 2006*6...............................
February 28, 2006*7 .............................
May 17, 2006*8.....................................
August 11, 2006*9 ................................
September 1, 2006*10...........................
September 6, 2006*11...........................
September 29, 2006*12.........................
October 11, 2006*13 .............................

Millions of yen

Number of shares
issued

Capital stock

Capital reserve

Changes

Balances

Changes

Balances

Changes

Balances

8.61
—

332,869.96
70,001
922,593.28
80,000
40,700
(68,000)
—
249,015
(67,000)
(439,534)
(195,000)

6,928,109.53
6,928,109.53
7,260,979.49
7,330,980.49
8,253,573.77
8,333,573.77
8,374,273.77
8,306,273.77
8,306,273.77
8,555,288.77
8,488,288.77
8,048,754.77
7,853,754.77

—
—
—
105,001
—
45,220
23,005
—
—
—
—
—
—

¥1,247,650
1,247,650
1,247,650
1,352,651
1,352,651
1,397,871
1,420,877
1,420,877
1,420,877
1,420,877
1,420,877
1,420,877
1,420,877

—
(499,503)
—
105,001
—
45,220
23,005
—
(1,000,000)
221,365
—
—
—

¥1,747,266
1,247,762
1,247,762
1,352,764
1,352,764
1,397,984
1,420,989
1,420,989
420,989
642,355
642,355
642,355
642,355

Remarks:
*1 Conversion of 1 share of preferred stock (13th series Type 4) to 9.61 shares of common stock
*2 Capital reserve was transferred to other capital surplus pursuant to Article 289-2 of the Commercial Code.
*3 Conversion of 32,000 shares of preferred stock (Type 1), 105,000 shares of preferred stock (Type 3) and 7,912 shares of preferred stock (13th series Type

4) to 477,781.96 shares of common stock

*4 Allotment to third parties:

Preferred stock (1st series Type 6):

70,001 shares

Issue price: ¥3,000 thousand Capitalization: ¥1,500 thousand

*5 Conversion of 107,087 shares of preferred stock (13th series Type 4) to 1,029,680.28 shares of common stock
*6 Public offering:

Common stock: 80,000 shares

Issue price: ¥1,130 thousand Capitalization: ¥565 thousand

*7 Allotment to third parties:

Common stock: 40,700 shares

Issue price: ¥1,130 thousand Capitalization: ¥565 thousand

*8 Repurchase and cancellation of 35,000 shares of preferred stock (Type 1) and 33,000 shares of preferred stock (Type 2)
*9 Capital reserve was transferred to other capital surplus pursuant to Article 448-1 of the Company Law.
*10 Increase in the number of common stock as a result of share exchange for making SMBC Friend Securities Co., Ltd. as our wholly-owned subsidiary (share

exchange ratio: 1-to-0.0008)

*11 Repurchase and cancellation of 67,000 shares of preferred stock (Type 2)
*12 Repurchase and cancellation of 500,000 shares of preferred stock (Type 3) and increase in shares of common stock of 60,466
*13 Repurchase and cancellation of 195,000 shares of preferred stock (Type 3)
*14 On April 30, 2008, all the rights to purchase shares related to SMFG’s 5th series, Type 4 preferred stock; 6th series, Type 4 preferred stock; 7th series,

Type 4 preferred stock; and 8th series, Type 4 preferred stock were exercised. As a result, the number of SMFG’s common stock outstanding increased
157,151 shares.

*15 On May 16, 2008, SMFG cancelled all 5th series, Type 4 preferred stock; 6th series, Type 4 preferred stock; 7th series, Type 4 preferred stock; and 8th

series, Type 4 preferred stock. As a consequence, the number of Type 4 preferred stock decreased 16,700 shares.

134

SMFG 2008

Number of Shares Issued

March 31, 2008

Number of Shares Issued

Common stock ..............................................................................................................................................................
Preferred stock (1st series Type 4) ...............................................................................................................................
Preferred stock (2nd series Type 4) .............................................................................................................................
Preferred stock (3rd series Type 4) ..............................................................................................................................
Preferred stock (4th series Type 4) ..............................................................................................................................
Preferred stock (5th series Type 4) ..............................................................................................................................
Preferred stock (6th series Type 4) ..............................................................................................................................
Preferred stock (7th series Type 4) ..............................................................................................................................
Preferred stock (8th series Type 4) ..............................................................................................................................
Preferred stock (9th series Type 4) ..............................................................................................................................
Preferred stock (10th series Type 4) ............................................................................................................................
Preferred stock (11th series Type 4) ............................................................................................................................
Preferred stock (12th series Type 4) ............................................................................................................................
Preferred stock (1st series Type 6) ...............................................................................................................................
Total ..............................................................................................................................................................................

7,733,653.77
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
4,175
70,001
7,853,754.77

Stock Exchange Listings
Tokyo Stock Exchange (First Section)
Osaka Securities Exchange (First Section)
Nagoya Stock Exchange (First Section)

Number of Common Shares, Classified by Type of Shareholders

March 31, 2008

Japanese government and local government ......................................................................
Financial institutions ............................................................................................................
Securities companies ..........................................................................................................
Other institutions ..................................................................................................................
Foreign institutions ..............................................................................................................
Foreign individuals ...............................................................................................................
Individuals and others ..........................................................................................................
Total .....................................................................................................................................
Fractional shares..................................................................................................................

Number of
shareholders

Number of
shares

Percentage of
total

6
434
120
7,486
1,002
43
172,744
181,835
—

4,751
2,456,588
76,241
1,397,932
3,047,023
130
727,326
7,709,991
23,662.77

0.06%

31.86
0.99
18.13
39.52
0.00
9.44
100.00
—

Notes: 1. Of 68,516.41 shares in treasury stock, 68,516 shares are included in “Individuals and others” and the remaining 0.41 shares are included in

“Fractional shares.”

2. “Other institutions” includes 358 shares held by the Securities Custody Association.

Principal Shareholders
a. Common Stock

March 31, 2008

Number of
shares

Percentage of
shares outstanding

The Master Trust Bank of Japan, Ltd. (Trust Account)..................................................................................
Japan Trustee Services Bank, Ltd. (Trust Account) ......................................................................................
Nippon Life Insurance Company ...................................................................................................................
State Street Bank and Trust Company*.........................................................................................................
State Street Bank and Trust Company 505103*............................................................................................
Hero & Co.** ..................................................................................................................................................
JPMorgan Chase Bank 380055* ...................................................................................................................
Sumitomo Mitsui Banking Corporation ..........................................................................................................
Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension***....................................................
Japan Trustee Services Bank, Ltd. (Trust Account 4) ...................................................................................
Total...............................................................................................................................................................

492,814.00
488,489.00
154,667.42
142,599.00
128,919.00
113,913.00
101,502.00
100,481.00
97,445.00
77,481.00
1,898,310.42

6.37%
6.31
1.99
1.84
1.66
1.47
1.31
1.29
1.26
1.00
24.54%

Standing agent: Mizuho Corporate Bank, Ltd.’s Kabutocho Custody & Proxy Department within the Settlement & Clearing Services Division

*
** Standing agent: Sumitomo Mitsui Banking Corporation, Securities Finance Marketing Department
*** Standing agent: The Hongkong and Shanghai Banking Corporation Limited’s Tokyo Branch Custody Department

SMFG 2008 135

b. Preferred Stock (1st series Type 4)

j. Preferred Stock (9th series Type 4)

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

The Goldman Sachs Group, Inc.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ................

4,175

100.00%

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

c. Preferred Stock (2nd series Type 4)

k. Preferred Stock (10th series Type 4)

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

The Goldman Sachs Group, Inc.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

d. Preferred Stock (3rd series Type 4)

l. Preferred Stock (11th series Type 4)

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

The Goldman Sachs Group, Inc.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

e. Preferred Stock (4th series Type 4)

m. Preferred Stock (12th series Type 4)

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

The Goldman Sachs Group, Inc.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

f. Preferred Stock (5th series Type 4)

n. Preferred Stock (1st series Type 6)

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

March 31, 2008
Shareholder
Sumitomo Life Insurance Company ....
Nippon Life Insurance Company ....
MITSUI LIFE INSURANCE

Number of
shares
23,334
20,000

Percentage of
shares outstanding
33.33%
28.57

COMPANY LIMITED ...................

16,667

23.81

g. Preferred Stock (6th series Type 4)

Mitsui Sumitomo Insurance

Number of
shares

Percentage of
shares outstanding

Company, Limited........................
Total................................................

10,000
70,001

14.29
100.00%

March 31, 2008
Shareholder

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

Notes: 1. Pursuant to Article 67 of the Enforcement Ordinance of the

Company Law, the exercise of voting rights of common shares
held by our subsidiary SMBC is not entitled.

2. The following reports on shareholdings (including their

amendment reports) were submitted to the authorities. However,
as we could not confirm how many shares are in beneficial
possession of the submitters as of March 31, 2008, we did not
include them in the list of principal shareholders shown above.
The contents of the reports are summarized as follows:

Submitters

Capital Research and

Filing date

Number of
shares*

Percentage
of shares
outstanding

Management Company .............. May 9, 07
Alliance Bernstein L.P. .................. Sep. 21, 07

379,830
413,431

4.91%
5.35

* Includes shares held by co-shareholders.

h. Preferred Stock (7th series Type 4)

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

i. Preferred Stock (8th series Type 4)

March 31, 2008
Shareholder

Number of
shares

Percentage of
shares outstanding

GSSM Holding II Corp.

(Standing agent: Goldman
Sachs Japan Co., Ltd.) ...............

4,175

100.00%

136

SMFG 2008

Stock Options

March 31

2008

Number of shares granted ..............................................................................................................
Type of stock...................................................................................................................................
Issue price.......................................................................................................................................
Amount capitalized when shares are issued...................................................................................
Exercise period of stock options .....................................................................................................

1,081 shares
Common stock
¥669,775 per share
¥334,888 per share
From June 28, 2004 to June 27, 2012

Note: Former SMBC issued and granted stock options to certain directors and employees pursuant to the resolution of the ordinary general meeting of
shareholders held on June 27, 2002. SMFG succeeded the obligations related to the stock options at the time of its establishment pursuant to the
resolution of the preferred shareholders’ meeting held on September 26, 2002 and the extraordinary shareholders’ meeting held on September 27, 2002.

Common Stock Price Range
Stock Price Performance

Year ended March 31

2008

2007

Yen

2006

2005

2004

High...................................................................................
Low....................................................................................

¥ 1,210,000
633,000

¥ 1,390,000
1,010,000

¥ 1,370,000
659,000

¥ 854,000
599,000

¥ 780,000
162,000

Notes: 1. Stock prices of common shares as quoted on the Tokyo Stock Exchange (First Section).

2. Preferred stocks are not listed on exchanges.

Six-Month Performance

October 2007

November 2007 December 2007

January 2008

February 2008

March 2008

Yen

High .........................................................
Low ..........................................................

¥1,000,000
803,000

¥ 951,000
707,000

¥ 980,000
801,000

¥877,000
700,000

¥860,000
738,000

¥751,000
633,000

Notes: 1. Stock prices of common shares as quoted on the Tokyo Stock Exchange (First Section).

2. Preferred stocks are not listed on exchanges.

SMFG 2008 137

Capital Ratio Information

Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

The consolidated capital ratio at the end of March 2007 and thereafter is calculated using the method stipulated in “Standards for Bank
Holding Company to Examine the Adequacy of Its Capital Based on Assets, Etc. Held by It and Its Subsidiaries Pursuant to Article 52-25 of
the Banking Law” (Notification 20 issued by the Japanese Financial Services Agency in 2006; hereinafter referred to as “the Notification”).
In addition to the method stipulated in the Notification to calculate the consolidated capital ratio (referred to as “First Standard” in the

Notification), SMFG has adopted the foundation internal ratings-based approach for calculating credit risk-weighted asset amounts and
implemented market risk controls. In calculating the amount corresponding to operational risk, SMFG has used the advanced measurement
approaches. Please note that the basic indicator approach was employed for the prior fiscal year ended March 31, 2007.

“Capital Ratio Information” was prepared based on the Notification and the terms and details in the section may differ from the terms and

details in other sections of the Annual Report.

■ Scope of Consolidation
1. Consolidated Capital Ratio Calculation

● Number of consolidated subsidiaries: 268

Please refer to “Principal Subsidiaries and Affiliates” on page 204 for their names and business outline.

● Scope of consolidated subsidiaries for the calculation of the consolidated capital ratio is based on the scope of consolidated subsidiaries for

preparing consolidated financial statements.

● There are no affiliates to which the proportionate consolidation method is applied.
● There are no companies engaged exclusively in ancillary banking business or in developing new businesses as stipulated in Article 52-23 of

the Banking Law.

2. Deduction from Capital

● Number of nonconsolidated subsidiaries subject to deduction from capital: 241

Principal subsidiaries:

SMLC MAHOGANY Co., Ltd. (Office rental, etc.)
SBCS Co., Ltd. (Venture capital and consulting)

● Number of financial affiliates subject to deduction from capital: 96

Please refer to “Principal Subsidiaries and Affiliates” on page 204 for their names and business outline.

3. Restrictions on Movement of Funds and Capital within Holding Company Group

There are no special restrictions on movement of funds and capital among SMFG and its group companies.

4. Companies Subject to Deduction from Capital with Capital below Basel II Required Amount and Total Shortfall Amount

Not applicable.

138

SMFG 2008

■ Capital Structure Information (Consolidated Capital Ratio (First Standard))
Regarding the calculation of capital ratio as of March 31, 2007, certain procedures were performed by KPMG AZSA & Co. pursuant to
“Treatment of Inspection of the Capital Ratio Calculation Framework Based on Agreed-Upon Procedures” (JICPA Industry Committee Report
No. 30). The certain procedures performed by the external auditor are not part of the audit of consolidated financial statements. The certain
procedures performed on our internal control framework for calculating the capital ratio are based on procedures agreed upon by SMFG and the
external auditor and are not a validation of appropriateness of the capital ratio itself or opinion on the internal controls related to the capital
ratio calculation.

March 31

Tier I capital:

Tier II capital:

Deductions*:
Total qualifying capital:
Risk-adjusted assets:

Tier I risk-adjusted
capital ratio:
Total risk-adjusted
capital ratio:
Required capital:

Capital stock...........................................................................................
Capital surplus........................................................................................
Retained earnings ..................................................................................
Treasury stock........................................................................................
Cash dividends to be paid ......................................................................
Foreign currency translation adjustments ..............................................
Stock acquisition rights...........................................................................
Minority interests ....................................................................................
Goodwill and others................................................................................
Gain on sale on securitization transactions............................................
Deductions of deferred tax assets..........................................................
Total Tier I capital (A) .............................................................................
Unrealized gains on other securities after 55% discount .......................
Land revaluation excess after 55% discount..........................................
General reserve for possible loan losses ...............................................
Excess amount of provision ...................................................................
Subordinated debt ..................................................................................
Total Tier II capital..................................................................................
Tier II capital included as qualifying capital (B) ......................................
(C) ..........................................................................................................
(D) = (A) + (B) - (C) ................................................................................
On-balance sheet items .........................................................................
Off-balance sheet items .........................................................................
Market risk items ....................................................................................
Operational risk ......................................................................................
Total risk-adjusted assets (E).................................................................

Millions of yen

2008

2007

¥ 1,420,877
57,826
1,740,610
(123,989)
(60,135)
(27,323)
43
1,643,903
(178,645)
(44,045)
(47,657)
4,381,464
334,313
37,220
59,517
67,758
2,523,062
3,021,872
3,021,872
737,792
¥ 6,665,543
¥ 49,095,397
10,239,755
430,220
3,351,976
¥ 63,117,349

¥ 1,420,877
57,773
1,386,436
(123,454)
(66,619)
(30,656)
14
1,399,794
(100,850)
(40,057)
—
3,903,257
825,432
39,367
35,309
175,921
2,564,195
3,640,226
3,640,226
690,759
¥ 6,852,723
¥ 47,394,806
8,713,413
412,044
4,020,082
¥ 60,540,346

(A) / (E) x 100 .........................................................................................

6.94%

6.44%

(D) / (E) x 100.........................................................................................
(E) x 8%..................................................................................................

10.56%

11.31%

¥ 5,049,387

¥ 4,843,227

* “Deductions” refers to deductions stipulated in Article 8-1 of the Notification and includes willful holding of securities issued by other financial institutions and

securities stipulated in Clause 2.

SMFG 2008 139

■ Capital Requirements

March 31

Capital requirements for credit risk:

Internal ratings-based approach.....................................................................................................
Corporate exposures:................................................................................................................
Corporate exposures (excluding specialized lending)..........................................................
Sovereign exposures............................................................................................................
Bank exposures....................................................................................................................
Specialized lending ..............................................................................................................
Retail exposures:.......................................................................................................................
Residential mortgage exposures..........................................................................................
Qualifying revolving retail exposures....................................................................................
Other retail exposures ..........................................................................................................
Equity exposures:......................................................................................................................
Grandfathered equity exposures ..........................................................................................
PD/LGD approach ................................................................................................................
Market-based approach .......................................................................................................
Simple risk weight method ..............................................................................................
Internal models method...................................................................................................
Credit risk-weighted assets under Article 145 of the Notification ..............................................
Securitization exposures ...........................................................................................................
Other exposures........................................................................................................................
Standardized approach ..................................................................................................................
Total capital requirements for credit risk.........................................................................................

Capital requirements for market risk:

Standardized measurement method ..............................................................................................
Interest rate risk.........................................................................................................................
Equity position risk ....................................................................................................................
Foreign exchange risk ...............................................................................................................
Commodities risk.......................................................................................................................
Options ......................................................................................................................................
Internal models method ..................................................................................................................
Total capital requirements for market risk ......................................................................................
Capital requirements for operational risk .......................................................................................
Total amount of capital requirements .............................................................................................

Billions of yen

2008

2007

¥5,294.7
3,351.0
2,943.4
42.8
137.3
227.5
844.3
336.8
123.6
383.9
368.6
245.3
53.1
70.1
59.7
10.4
241.5
164.1
325.3
677.6
¥5,972.3

9.2
6.9
0.2
2.0
—
—
25.3
34.4
268.2
¥6,274.9

¥5,155.6
3,185.5
2,836.8
42.8
126.6
179.3
763.6
332.1
81.1
350.4
424.6
336.2
35.7
52.7
52.7
—
301.5
158.9
321.3
487.1
¥5,642.7

4.7
3.2
0.6
0.9
—
—
28.2
33.0
321.6
¥5,997.2

Notes: 1. Capital requirements for credit risk are capital equivalents to “credit risk-weighted assets x 8%” under the standardized approach and “credit risk-weighted assets x 8% + expected

loss amount” under the internal ratings-based approach. Regarding exposures to be deducted from capital, the deduction amount is added to the amount of required capital.

2. The above amounts are after credit risk mitigation.
3. Securitization exposures include such exposure based on the standardized approach.
4. “Other exposures” includes estimated lease residual values, purchased receivables (including exposure to qualified corporate enterprises and others), and other assets.

■ Internal Ratings-Based (IRB) Approach
1. Scope

SMFG and the following consolidated subsidiaries have adopted the foundation IRB approach for exposures.
(1) Domestic Operations

Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Card Company, Limited, SMBC Guarantee Co., Ltd. and SMBC Finance
Service Co., Ltd.
(2) Overseas Operations

Sumitomo Mitsui Banking Corporation Europe Limited, Sumitomo Mitsui Banking Corporation of Canada, Banco Sumitomo Mitsui
Brasileiro S.A., PT Bank Sumitomo Mitsui Indonesia, SMBC Leasing and Finance, Inc., SMBC Capital Markets, Inc., SMBC Capital
Markets Limited, and SMBC Derivative Products Limited

Further, of consolidated subsidiaries that have adopted the standardized approach for exposures as of March 31, 2008, Sumitomo Mitsui
Finance and Leasing Co., Ltd., THE MINATO BANK, LTD., and Kansai Urban Banking Corporation are scheduled to adopt the foundation
IRB approach from March 31, 2010.

Note: Directly controlled SPCs and limited partnerships for investment of consolidated subsidiaries using the foundation IRB approach have also adopted the foundation IRB approach.

Further, the IRB approach is applied to equity exposures on a group basis, including equity exposures of consolidated subsidiaries applying the standardized approach.

140

SMFG 2008

2. Exposures by Asset Class
(1) Corporate Exposures

A. Corporate, Sovereign and Bank Exposures

(A) Rating Procedures

●

“Corporate, sovereign and bank exposures” includes credits to domestic and overseas C&I companies, individuals for business
purposes (domestic only), sovereigns, public sector entities, and financial institutions. Business loans such as apartment
construction loans, and SME loans with the standardized screening process (hereinafter referred to as “standardized SME loans”)
are, in principle, included in “retail exposures”. However, credits of more than ¥100 million are treated as corporate exposures in
accordance with the Notification.

● An obligor is assigned an obligor grade by first assigning a financial grade using a financial strength grading model and data

●

obtained from the obligor’s financial statements. The financial grade is then adjusted taking into account the actual state of the
obligor’s balance sheet and qualitative factors to derive the obligor grade (for details, please refer to “Credit Risk Assessment and
Quantification” on page 39). Different rating series are used for domestic and overseas obligors - J1 ~ J10 for domestic obligors
and G1 ~ G10 for overseas obligors - as shown below due to differences in actual default rate levels and portfolios’ grade
distribution. Different PD (Probability of Default) values are applied also.
In addition to the above basic rating procedure which builds on the financial grade assigned at the beginning, in some cases, the
obligor grade is assigned based on the parent company’s credit quality or credit ratings published by external rating agencies. The
Japanese government, local authorities and other public sector entities with special basis for existence and unconventional
financial statements are assigned obligor grades based on their attributes (for example, “local municipal corporations”), as the data
on these obligors are not suitable for conventional grading models. Further, credits to individuals for business purposes, business
loans and standardized SME loans are assigned obligor grades using grading models developed specifically for these exposures.
● PDs used for calculating credit risk-weighted assets are estimated based on the default experience for each grade and taking into
account the possibility of estimation errors. In addition to internal data, external data are used to estimate and validate PDs. The
definition of default is the definition stipulated in the Notification (an event that would lead to an exposure being classified as
“substandard loans,” “doubtful assets” or “bankrupt and quasi-bankrupt assets” occurring to the obligor).

Obligor Grade

Domestic
Corporate

Very high certainty of debt repayment

Normal Borrowers

Definition

Borrower Category

High certainty of debt repayment

Satisfactory certainty of debt repayment

Debt repayment is likely but this could change in
cases of significant changes in economic trends or
business environment

No problem with debt repayment over the short
term, but not satisfactory over the mid - to long -
term and the situation could change in cases of
significant changes in economic trends or business
environment

Currently no problem with debt repayment, but
there are unstable business and financial factors
that could lead to debt repayment problems

Close monitoring is required due to problems in
meeting loan terms and conditions, sluggish/unstable
business, or financial problems

Borrowers Requiring Caution

J7R

G7R

Of which substandard borrowers

Substandard Borrowers

Currently not bankrupt, but experiencing business
difficulties, making insufficient progress in
restructuring, and highly likely to go bankrupt

Though not yet legally or formally bankrupt, has
serious business difficulties and rehabilitation is
unlikely; thus, effectively bankrupt

Potentially Bankrupt Borrowers

Effectively Bankrupt Borrowers

J10

G10

Legally or formally bankrupt

Bankrupt Borrowers

SMFG 2008 141

(B) Portfolio

a. Domestic Corporate, Sovereign and Bank Exposures

Total

¥18,826.6
13,657.5
1,820.6

15,013.1
6,158.2
937.6
¥56,413.7

Total

¥18,261.6
14,378.6
1,978.0

March 31, 2008

J1-J3 .....................................................
J4-J6 .....................................................
J7 (excluding J7R) ................................
Japanese government and

local municipal corporations ............
Other.....................................................
Default (J7R, J8-J10)............................
Total......................................................

March 31, 2007

J1-J3 .....................................................
J4-J6 .....................................................
J7 (excluding J7R) ................................
Japanese government and

Notes: 1. “LGD” stands for loss given default.

Billions of yen

Exposure amount

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

¥13,563.7
10,647.2
1,588.6

¥ 5,263.0
3,010.3
232.0

0.10%
1.10
11.50

44.74%
41.31
42.34

13,854.4
5,309.2
905.6
¥45,868.7

1,158.7
849.0
32.0
¥10,545.0

0.00
1.54
100.00
—

41.65
43.29
42.77
—

Billions of yen

Exposure amount

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

¥13,350.4
11,355.4
1,759.6

10,983.0
6,793.1
991.9
¥53,386.2

10,875.2
6,016.1
965.0
¥44,321.7

¥ 4,911.1
3,023.2
218.4

107.8
777.0
26.9
¥ 9,064.5

0.10%
0.84
10.67

44.97%
41.78
40.63

0.00
1.26
100.00
—

44.70
43.48
43.45
—

Weighted-
average
risk weight

23.61%
69.45
174.93

0.49
74.03
—
—

Weighted-
average
risk weight

22.88%
63.13
161.66

0.46
70.91
—
—

2. “Other” includes exposures guaranteed by credit guarantee corporations, exposures to public sector entities and voluntary organizations, and exposures to
obligors not assigned obligor grades because they have yet to close their books (for example, newly established companies), as well as business loans and
standardized SME loans of more than ¥100 million.

b. Overseas Corporate, Sovereign and Bank Exposures

Billions of yen

Exposure amount

March 31, 2008

G1-G3 ...................................................
G4-G6 ...................................................
G7 (excluding G7R) .............................
Other.....................................................
Default (G7R, G8-G10).........................
Total......................................................

Total

¥ 21,243.9
985.7
176.0
75.5
70.9
¥ 22,552.0

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

¥12,861.7
744.8
79.7
57.2
24.9
¥13,768.3

¥8,382.2
240.8
96.3
18.4
46.0
¥8,783.7

0.17%
1.71
23.72
1.38
100.00
—

39.04%
44.42
44.89
44.89
44.63
—

Billions of yen

Exposure amount

March 31, 2007

Total

¥ 12,579.4
670.4
152.0
163.6
88.7
¥ 13,654.1

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

¥6,984.1
478.4
71.5
121.5
77.8
¥7,733.3

¥5,595.3
192.0
80.5
42.1
10.9
¥5,920.8

0.22%
1.71
27.13
0.94
100.00
—

43.73%
44.66
44.89
44.88
44.95
—

Weighted-
average
risk weight

27.20%

106.65
239.05
112.32
—
—

Weighted-
average
risk weight

38.57%

105.65
251.83
86.24
—
—

Note: “Other” includes exposures to obligors not assigned obligor grades because they have yet to close their books (for example, newly established companies).

142

SMFG 2008

B. Specialized Lending (SL)
(A) Rating Procedures

●

“Specialized lending” is sub-classified into “project finance,” “object finance,” “commodities finance,” “income-producing real
estate” (IPRE) and “high-volatility commercial real estate” (HVCRE) in accordance with the Notification. Project finance is
financing of a single project, such as a power plant or transportation infrastructure, and cash flows generated by the project is the
primary source of repayment. Object finance includes aircraft finance and ship finance, and IPRE and HVCRE include real estate
finance (a primary example is non-recourse real estate finance). There were no commodities finance exposures as of March 31, 2008.

● Each SL product is assigned a grade using grading models based primarily on the expected loss ratio, and qualitative assessment.
As with obligor grades, there are ten grade levels but the definition of each grade differs from that of the obligor grade which is
focused on PD.

The credit risk-weighted asset amount for the SL category is calculated by mapping the expected loss-based facility grades to

the below five categories of the Notification.

(B) Portfolio

a. Project Finance, Object Finance and IPRE

March 31

Strong:

Risk weight

Project
finance

2008
Object
finance

IPRE

Project
finance

2007

Object
finance

IPRE

Billions of yen

Residual term less than 2.5 years ................
Residual term 2.5 years or more ..................

50%
70%

¥ 123.4
583.0

7.3
67.5

¥ 423.3
705.0

¥ 100.4
435.9

¥ 3.2
64.8

¥ 274.6
695.7

Good:

Residual term less than 2.5 years ................
Residual term 2.5 years or more ..................
Satisfactory........................................................
Weak .................................................................
Default ...............................................................
Total ..................................................................

70%
90%
115%
250%
—

28.3
285.3
40.5
15.4
5.0
¥1,080.9

—
15.2
16.0
4.7
0.1
¥ 110.9

53.4
132.0
83.2
10.7
—
¥1,407.5

34.8
146.8
31.4
22.7
3.6
¥ 775.6

1.0
10.0
9.0
8.2
—
¥ 96.3

44.7
105.0
56.4
1.5
—
¥1,177.9

b. HVCRE

March 31

Strong:

Risk weight

Billions of yen
2008

2007

Residual term less than 2.5 years ...............
Residual term 2.5 years or more .................

70%
95%

3.9
—

5.9
5.6

Good:

Residual term less than 2.5 years ...............
Residual term 2.5 years or more .................
Satisfactory .......................................................
Weak ................................................................
Default ..............................................................
Total..................................................................

95%
120%
140%
250%
—

76.3
105.1
201.5
—
—
¥ 386.8

86.8
46.4
162.0
—
—
¥306.7

(2) Retail Exposures

A. Residential Mortgage Exposures

(A) Rating Procedures

●

“Residential mortgage exposures” includes mortgage loans to individuals and some real estate loans in which the property consists
of both residential and commercial facilities such as a store or rental apartment units, but excludes apartment construction loans.

● Mortgage loans are rated as follows.

Mortgage loans are allocated to a portfolio segment with similar risk characteristics in terms of (a) default risk determined using
loan contract information, results of an exclusive grading model and a borrower category under self-assessment executed in
accordance with the financial inspection manual of the Japanese FSA, and (b) recovery risk at the time of default determined using
LTV (Loan To Value) calculated based on the assessment value of collateral real estate. PDs and LGDs are estimated based on the
default experience for each segment and taking into account the possibility of estimation errors.

Further, the portfolio is subdivided based on the lapse of years from the contract date, and the effectiveness of segmentation in

terms of default risk and recovery risk is validated periodically.

Internal data are used to estimate and validate PDs and LGDs. The definition of default is the definition stipulated in the

Notification.

SMFG 2008 143

(B) Portfolio

March 31, 2008

Mortgage loans
PD segment:

Not delinquent

Billions of yen

Exposure amount

Total

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

Weighted-
average
risk weight

Use model .............................
Other .....................................
Delinquent ..................................
Default ..................................................
Total......................................................

¥ 9,086.6
853.1
51.5
114.9
¥ 10,106.1

¥ 8,993.8
853.1
44.8
114.2
¥10,005.9

¥ 92.8
—
6.6
0.8
¥100.2

0.39%
0.78
38.53
100.00
—

40.15%
61.05
44.49
40.94
—

25.59%
70.76
249.90
29.07
—

Billions of yen

Exposure amount

Total

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

Weighted-
average
risk weight

March 31, 2007

Mortgage loans
PD segment:

Not delinquent

¥ 8,925.2
915.3
39.1
119.3
¥ 9,998.9

¥ 8,818.8
915.3
31.9
116.7
¥ 9,882.7

¥ 106.4
—
7.3
2.6
¥ 116.2

0.32%
0.62
26.34
100.00
—

45.91%
70.60
51.49
46.09
—

25.11%
67.60
287.54
26.54
—

Notes: 1. “Other” includes loans guaranteed by employers.

2. “Delinquent” loans are past due loans and loans to obligors categorized as “Borrowers Requiring Caution” that do not satisfy the definition of default stipulated

in the Notification.

3. The EL default weighted average is included in the LGD weighted average for default. Please note that the LGD weighted average for default as of March 31,

2007 was 48.21% and as of March 31, 2008 was 43.27%.

144

SMFG 2008

B. Qualifying Revolving Retail Exposures (QRRE)

(A) Rating Procedures

●

“Qualifying revolving retail exposures” includes card loans and credit card balances.

● Card loans and credit card balances are rated as follows.

Card loans and credit card balances are allocated to a portfolio segment with similar risk characteristics determined based, for card
loans, on the credit quality of the loan guarantee company, credit limit, settlement account balance and payment history, and, for
credit card balances, on repayment history and frequency of use.

PDs and LGDs used to calculate credit risk-weighted asset amounts are estimated based on the default experience for each

segment and taking into account the possibility of estimation errors.

Further, the effectiveness of segmentation in terms default risk and recovery risk is validated periodically; internal data are used

to estimate and validate PDs and LGDs; and the definition of default is the definition stipulated in the Notification.

(B) Portfolio

March 31, 2008

Card loans

PD segment:

Billions of yen

Exposure amount

On-balance sheet assets

Total

Balance

Increase

Off-balance
sheet
assets

Undrawn
amount

Average
CCF

Weighted-
average
PD

Weighted-
average
LGD

Weighted-
average
risk weight

Not delinquent .....
Delinquent ...........

¥ 451.3
59.9

¥ 379.3
58.7

¥ 71.9
1.2

¥ —
—

¥ 146.2
8.6

49.18%
14.24

2.04%

47.35

83.41%
90.63

51.67%

257.00

Credit card balances
PD segment:

Not delinquent .....
Delinquent ...........
Default ...........................
Total ..............................

March 31, 2007

Card loans

PD segment:

978.3
7.0
22.3
¥1,518.7

653.0
5.7
19.6
¥1,116.4

325.3
1.2
2.7
¥402.3

—
—
—
¥ —

3,795.9
—
—
¥ 3,950.7

8.57
—
—
—

1.14
75.37
100.00
—

79.82
82.68
81.79
—

26.80
137.44
83.99
—

Billions of yen

Exposure amount

On-balance sheet assets

Total

Balance

Increase

Off-balance
sheet
assets

Undrawn
amount

Average
CCF

Weighted-
average
PD

Weighted-
average
LGD

Weighted-
average
risk weight

Not delinquent .....
Delinquent ...........

¥ 430.4
29.9

¥ 356.3
29.2

¥ 74.1
0.7

¥ —
—

¥ 141.8
4.3

52.24%
15.33

2.45%
9.81

79.11%
81.16

58.93%

126.30

Credit card balances
PD segment:

Not delinquent .....
Delinquent ...........
Default ...........................
Total ..............................

904.3
6.0
14.4
¥1,385.1

599.4
4.9
12.3
¥1,002.1

305.0
1.1
2.2
¥ 383.0

—
—
—
¥ —

3,497.3
—
—
¥3,643.4

8.72
—
—
—

1.09
71.46
100.00
—

80.49
83.42
83.22
—

26.27
152.96
48.93
—

Notes: 1. The on-balance sheet exposure amount is estimated by estimating the amount of increase in each transaction balance and not by multiplying the undrawn

amount by CCF (credit conversion factor).

2. “Average CCF” is the “on-balance sheet exposure amount ÷ undrawn amount” and provided for reference only. It is not used for estimating on-balance sheet

exposure amounts.

3. Past due loans of less than three months are recorded in “delinquent.”
4. The EL default weighted average is included in the LGD weighted average for default. Please note that the LGD weighted average for default as of March 31,

2007 was 87.13% and as of March 31, 2008 was 88.51%.

SMFG 2008 145

C. Other Retail Exposures
(A) Rating Procedures

●

“Other retail exposures” includes business loans such as apartment construction loans, standardized SME loans, and consumer
loans such as My Car Loan.

● Business loans, standardized SME loans and consumer loans are rated as follows.

a. Business loans and standardized SME loans are allocated to a portfolio segment with similar risk characteristics in terms of (a)
default risk determined using loan contract information, results of an exclusive grading model and a borrower category under
self-assessment executed in accordance with the financial inspection manual of the Japanese FSA, and (b) recovery risk
determined based on, for standardized SME loans, obligor attributes and, for business loans, LTV. PD and LGD are estimated
based on the default experience for each segment and taking into account the possibility of estimation errors.

b. Rating procedures for consumer loans depends on whether the loan is collateralized. Collateralized consumer loans are allocated

to a portfolio segment using the same standards as for mortgage loans of “A. Residential Mortgage Exposures.”
Uncollateralized consumer loans are allocated to a portfolio segment based on account history. PDs and LGDs are estimated
based on the default experience for each segment and taking into account the possibility of estimation errors.

Further, the effectiveness of segmentation in terms default risk and recovery risk is validated periodically, and internal data

are used to estimate and validate PDs and LGDs. The definition of default is the definition stipulated in the Notification.

(B) Portfolio

March 31, 2008

Business loans
PD segment:

Not delinquent

Billions of yen

Exposure amount

Total

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

Weighted-
average
risk weight

Use model .............................
Other .....................................
Delinquent ..................................

¥1,506.6
231.9
524.7

¥ 1,485.0
231.6
520.8

¥ 21.7
0.4
3.9

1.16%
1.25
11.72

62.77%
56.70
67.99

59.31%
57.41
110.04

Consumer loans
PD segment:

Not delinquent

319.5
240.8
38.0
214.3
¥3,075.9

302.9
238.7
37.6
211.4
¥ 3,028.0

16.6
2.1
0.3
2.8
¥ 47.9

1.63
1.81
31.17
100.00
—

43.46
65.68
47.27
61.85
—

51.07
81.19
120.99
65.39
—

Billions of yen

Exposure amount

Total

On-balance
sheet assets

Off-balance
sheet assets

Weighted-
average PD

Weighted-
average LGD

Weighted-
average
risk weight

March 31, 2007

Business loans
PD segment:

Not delinquent

Use model .............................
Other .....................................
Delinquent ..................................

¥1,805.5
208.7
352.2

¥1,790.1
208.7
348.5

¥ 15.4
0.0
3.7

1.82%
1.78
10.99

60.42%
53.09
60.21

64.34%
62.24
98.65

Consumer loans
PD segment:

Not delinquent

370.1
249.3
37.2
195.8
¥3,218.8

356.3
247.1
36.9
184.0
¥3,171.5

13.8
2.3
0.3
11.8
¥ 47.3

1.47
1.76
23.10
100.00
—

45.11
66.29
49.81
56.46
—

51.30
64.45
116.06
44.71
—

Notes: 1. “Business loans” includes apartment construction loans and standardized SME loans.

2. “Other” includes loans guaranteed by employers.
3. Delinquent” loans are past due loans and loans to obligors categorized as “Borrowers Requiring Caution” that do not satisfy the definition of default stipulated

in the Notification.

4. The EL default weighted average is included in the LGD weighted average for default. Please note that the LGD weighted average for default as of March 31,

2007 was 60.04% and as of March 31, 2008 was 67.08%.

146

SMFG 2008

(3) Equity Exposures and Credit Risk-Weighted Assets under Article 145 of the Notification

A. Equity Exposures

(A) Rating Procedures

When acquiring equities subject to the PD/LGD approach, issuers are assigned obligor grades using the same rules as those of general
credits to C&I companies, sovereigns and financial institutions. The obligors are monitored (for details, please refer to page 41) and
their grades are revised if necessary (credit risk-weighted asset amount is set to 1.5 times when they are not monitored individually). In
the case there is no credit transaction with the issuer or it is difficult to obtain financial information, internal grades are assigned using
ratings of external rating agencies if it is a qualifying investment. In the case it is difficult to obtain financial information and it is not
a qualifying investment, the simple risk weight method under the market-based approach is applied.

(B) Portfolio

a. Equity Exposure Amounts

March 31

Market-based approach ....................................................................................................
Simple risk weight method...........................................................................................
Listed equities (300%) ............................................................................................
Unlisted equities (400%).........................................................................................
Internal models method ...............................................................................................
PD/LGD approach.............................................................................................................
Grandfathered equity exposures.......................................................................................
Total ..................................................................................................................................

Billions of yen

2008

¥ 238.8
191.0
60.1
130.9
47.9
504.2
2,892.9
¥ 3,636.0

2007

¥ 166.8
166.8
45.6
121.2
—
367.5
3,965.0
¥ 4,499.3

Notes: 1. The above exposures are equity exposures stipulated in the Notification and differ from “stocks” described in the consolidated financial statements.

2. The “Grandfathered equity exposures” amount was calculated in accordance with Supplementary Provision No. 15 of the Notification.

b. PD/LGD Approach

March 31

J1-J3.....................................................
J4-J6.....................................................
J7 (excluding J7R)................................
Other.....................................................
Default (J7R, J8-J10)............................
Total......................................................

Billions of yen

2008

2007

Exposure
amount

Weighted-
average PD

¥ 481.8
10.4
11.1
0.9
0.1
¥ 504.2

0.08%
0.60
9.89
2.60
100.00
—

Weighted-
average risk
weight

111.66%
194.76
440.46
275.48
—
—

Exposure
amount

Weighted-
average PD

¥ 350.0
8.9
4.4
4.2
0.0
¥ 367.5

0.05%
0.47
9.30
2.24
100.00
—

Weighted-
average
risk weight

104.84%
176.29
432.42
275.00
—
—

Notes: 1. The above exposures are “equity exposures” stipulated in the Notification to which the PD/LGD approach is applied and differ from “stocks” of consolidated

financial statements.

2. “Other” includes exposures to public sector entities.

B. Credit Risk-Weighted Assets under Article 145 of the Notification

(A) Outline of method for calculating credit risk assets

Exposures under Article 145 of the Notification include credits to funds. In the case of such exposures, in principle, each underlying
asset of the fund is assigned an obligor grade to calculate the asset’s credit risk-weighted asset amount and the amounts are totaled to
derive the credit risk-weighted asset amount of the fund. When stocks account for more than half of the underlying assets of the
fund, or it is difficult to directly calculate the credit risk-weighted asset amount of individual underlying assets, the credit risk-
weighted asset amount of the fund is calculated using the simple majority adjustment method, in which credit risk assets are
calculated using a risk weight of 400% (when the risk weighted average of individual assets underlying the portfolio is less than
400%) or a risk weight of 1,250% (in other cases).

(B) Portfolio

March 31

Billions of yen

2008

2007

Exposures under Article 145 of the Notification................................................................

¥ 1,010.8

¥ 1,896.2

SMFG 2008 147

(4) Analysis of Actual Losses

A. Year-On-Year Comparison of Actual Losses

SMFG recorded total credit costs (general provisions, nonperforming loan write-offs, and gains on collection of written-off claims) of
¥248.6 billion on a consolidated basis in fiscal 2007, a year-on-year increase of ¥103.6 billion.

SMBC recorded ¥147.8 billion in total credit costs on a nonconsolidated basis in fiscal 2007, a year-on-year increase of ¥58.3 billion.
In terms of credit exposure category, credit costs for corporate exposures increased ¥84.6 billion, to ¥143.2 billion. The principal factors
accounting for this increase were the removal of nonperforming exposure from the balance sheets, a decline in the amount of reversal of
reserves for possible loan losses accompanying the improvement in obligor classification of loan customers and as a result of other factors,
and the emergence of unexpected deterioration in the standing of a portion of obligors as a result of worsening of industry conditions. In
addition, credit costs for other retail exposures increased ¥15.8 billion, to ¥59.8 billion, mainly due to higher default rates.

Total Credit Costs

Billions of yen

Fiscal 2007

Fiscal 2006

Fiscal 2005

Fiscal 2007 increase
(decrease) from
Fiscal 2006

SMFG (consolidated) total ...........................................
SMBC (consolidated) total ...........................................
SMBC (nonconsolidated) total .....................................
Corporate exposures ..............................................
Sovereign and bank exposures ..............................
Residential mortgage exposures ............................
QRRE......................................................................
Other retail exposures.............................................

¥ 248.6
221.6
147.8
143.2
0.5
0.1
0.0
59.8

¥ 145.0
122.9
89.5
58.7
(0.7)
0.5
(0.1)
43.9

¥ 302.0
275.0
230.9
49.1
(0.4)
(0.1)
0.7
33.6

¥ 103.6
98.7
58.3
84.6
1.2
(0.4)
0.1
15.8

Notes: 1. The above amounts do not include gains/losses on equity exposures, exposures on capital market-driven transactions (such as bonds) and exposures under Article 145 of

the Notification that were recognized as gains/losses on bonds and stocks in the income statement.

2. Exposure category amounts do not include general provisions for Normal Borrowers.
3. Bracketed fiscal year amount indicates gains generated by the reversal of provisions, etc.
4. Credit costs for residential mortgages and QRRE guaranteed by consolidated subsidiaries are not included in the total credit costs of SMBC (nonconsolidated).

B. Comparison of Estimated and Actual Losses

Billions of yen

Estimated loss amounts

After deduction
of reserves

Actual losses
(Fiscal 2007)

SMFG (consolidated) total .........................................................................................
SMBC (consolidated) total .........................................................................................
SMBC (nonconsolidated) total ...................................................................................
Corporate exposures ............................................................................................
Sovereign and bank exposures ............................................................................
Residential mortgage exposures ..........................................................................
QRRE ...................................................................................................................
Other retail exposures ..........................................................................................

¥ —
—
741.1
637.4
10.8
4.5
0.1
88.3

¥ —
—
164.8
111.5
9.0
4.0
0.1
53.3

¥248.6
221.6
147.8
143.2
0.5
0.1
0.0
59.8

Notes: 1. The “Estimated loss amounts” are the EL for the end of fiscal 2006. Amounts on consumer loans guaranteed by SMBC’s consolidated subsidiaries or its affiliates as

well as on equity exposures and other exposures subject to Article 145 of the Notification are excluded.

2. Representing the estimated loss amount “After deduction of reserves” for possible losses on substandard loans or below.

148

SMFG 2008

■ Standardized Approach
1. Scope

The following consolidated subsidiaries have adopted the standardized approach for exposures as of March 31, 2008. (i.e. consolidated
subsidiaries not listed in the “Internal Ratings-Based (IRB) Approach: 1. Scope” on page 140.)
(1) Consolidated subsidiaries planning to adopt phased rollout of the foundation IRB approach

Sumitomo Mitsui Finance and Leasing Co., Ltd., THE MINATO BANK, LTD., and Kansai Urban Banking Corporation. These three
subsidiaries are scheduled to adopt the foundation IRB approach from March 31, 2010.

(2) Other consolidated subsidiaries

These are consolidated subsidiaries judged not to be significant in terms of credit risk management based on the type of business, scale,
and other factors. These subsidiaries will adopt the standardized approach on a permanent basis.

2. Credit Risk-Weighted Asset Calculation Methodology

A 100% risk weight is applied to claims on corporates in accordance with Article 45 of the Notification, and risk weights corresponding to
country risk scores published by the Organization for Economic Cooperation and Development (OECD) are applied to claims on sovereigns
and financial institutions.

3. Exposure Balance by Risk Weight Segment

March 31

Billions of yen

2008

Assigned country
risk score

2007

Assigned country
risk score

0% .........................................................................................................
10% .......................................................................................................
20% .......................................................................................................
35% .......................................................................................................
50% .......................................................................................................
75% .......................................................................................................
100% .....................................................................................................
150% .....................................................................................................
Total ......................................................................................................

¥ 1,208.0
547.1
748.8
1,356.8
156.7
1,835.1
6,397.6
24.5
¥12,274.7

¥ 96.0
—
318.4
—
1.1
—
0.3
—
¥ 415.8

¥ 1,078.7
562.3
574.4
1,247.5
97.7
643.5
5,128.1
16.6
¥ 9,348.9

¥ 83.7
—
261.9
—
1.9
—
0.4
—
¥ 348.0

Notes: 1. The above amounts are exposures after credit risk mitigation (but before deduction of direct write-offs). Please note that for off-balance sheet assets the amount of

exposure has been included.

2. Securitization exposures have not been included.

SMFG 2008 149

■ Credit Risk Mitigation Techniques
1. Credit Risk Management Policy and Procedures

In calculating credit risk-weighted asset amounts, SMFG takes into account credit risk mitigation (CRM) techniques. Specifically, amounts
are adjusted for eligible financial or real estate collateral, guarantees, and credit derivatives or by netting loans against the obligors’ deposits
with SMFG financial institutions. The methods and scope of these adjustments and methods of supervision are as follows.
(1) Scope and Management

A. Collateral (Eligible Financial or Real Estate Collateral)

SMBC designates deposits and securities as eligible financial collateral and land and buildings as eligible real estate collateral.

Real estate collateral is evaluated by taking into account its fair value, appraised value, and current conditions, as well as our lien

position. Real estate collateral must maintain sufficient collateral value in the event security rights must be exercised due to delinquency.
However, during the period from acquiring the rights to exercising the rights, the property may deteriorate or suffer damages from
earthquakes or other natural disasters, or there may be changes in the lien position due to, for example, attachment or establishment of
liens by a third party. Therefore, the regular monitoring of collateral is implemented according the type of property and the type of
security interest.

B. Guarantees and Credit Derivatives

Guarantors are sovereigns, municipal corporations, credit guarantee corporations and other public entities, financial institutions, and
commercial/industrial (C&I) corporations. Counterparties to credit derivative transactions are mostly domestic and overseas banks and
securities companies.

Credit risk-weighted asset amounts are calculated taking into account credit risk mitigation of guarantees and credit derivatives
acquired from entities with sufficient ability to provide production, such as sovereigns, municipal corporations, and other public sector
entities of comparable credit quality, and financial institutions and C&I companies with sufficient credit ratings.

C. Netting of Loans against Deposits

SMBC verifies the legal effectiveness of netting arrangements for loans and deposits for each transaction. Specifically, lending transactions
subject to the netting of loans against deposits are stipulated in the “Agreement on Bank Transactions,” and fixed-term deposits that
have fixed maturity dates and cannot be transferred to third-party entities are subject to netting. Regarding deposits with us submitted
as collateral, their effect as credit risk mitigation is taken into account under the eligible financial collateral framework described in A.
above.

Further, maturity dates and balances (including the post-netting situation) are monitored for subject loans and deposits in accordance

with the Notification. When there is a maturity/currency mismatch, netting is executed after making adjustments as stipulated in the
Notification, and the credit risk-weighted asset amount is calculated after netting.

(2) Concentration of Credit Risk and Market Risk Accompanying Application of Credit Risk Mitigation (CRM) Techniques

At SMBC, there is a framework in place for controlling concentrations of risk in obligors with large exposures, which includes credit limit
guidelines, risk concentration monitoring, and reporting to the Credit Risk Committee (please refer to page 38). Further, exposures to these
obligors are monitored on a group basis, taking account of risk concentration in their parent companies in cases of guaranteed exposures.
When marketable financial products (for example, credit derivatives) are used as credit risk mitigants, market risk generated by these

products is controlled by setting upper limits.

150

SMFG 2008

2. Exposure Balance after CRM

March 31

Billions of yen

2008

2007

Eligible financial
collateral

Eligible real
estate collateral

Eligible financial
collateral

Eligible real
estate collateral

¥ 5,070.6
997.0
1,107.4
2,966.2
104.6
¥ 5,175.2

¥ 3,081.8
3,080.3
1.4
0.1
—
¥ 3,081.8

¥ 2,325.5
1,675.0
0.1
650.4
133.4
¥ 2,458.9

¥ 2,661.4
2,660.2
1.2
0.1
—
¥ 2,661.4

Billions of yen

2008

2007

March 31

Guarantee

Credit derivative

Guarantee

Credit derivative

Foundation IRB approach .....................................................................
Corporate exposures........................................................................
Sovereign exposures........................................................................
Bank exposures................................................................................
Residential mortgage exposures......................................................
QRRE ...............................................................................................
Other retail exposures ......................................................................
Standardized approach .........................................................................
Total ......................................................................................................

¥ 5,078.6
4,189.8
245.2
399.9
243.6
—
0.2
120.4
¥ 5,199.0

¥ 302.5
302.5
—
—
—
—
—
—
¥ 302.5

¥ 3,659.7
3,044.9
58.3
294.8
261.3
—
0.4
90.2
¥ 3,749.9

¥ 226.0
226.0
—
—
—
—
—
—
¥ 226.0

■ Derivative Transactions and Long Settlement Transactions
1. Risk Management Policy and Procedures

(1) Policy on Collateral Security and Impact of Deterioration of Our Credit Quality

Collateralized derivative is a CRM technique in which collateral is delivered or received regularly in accordance with replacement cost.
The Group conducts collateralized derivative transactions as necessary, thereby reducing credit risk. In the event our credit quality
deteriorates, however, the counterparty may demand additional collateral, but its impact is deemed to be insignificant.

(2) Netting

Netting is another CRM technique, and “close-out netting” is the main type of netting. In close-out netting, when a default event, such
as bankruptcy, occurs to the counterparty, all claims against, and obligations to, the counterparty, regardless of maturity and currency,
are netted out to create a single claim or obligation.

Close-out netting is applied to foreign exchange and swap transactions covered under a master agreement with a net-out clause or

other means of securing legal effectiveness, and the effect of CRM is taken into account only for such claims and obligations.

2. Credit Equivalent Amounts

(1) Derivative Transactions and Long Settlement Transactions

A. Calculation Method

Current exposure method

SMFG 2008 151

B. Credit Equivalent Amounts

March 31

Gross replacement cost........................................................................................................
Gross add-on amount...........................................................................................................
Gross credit equivalent amount............................................................................................
Foreign exchange related transactions ...........................................................................
Interest rate related transactions.....................................................................................
Gold related transactions ................................................................................................
Equities related transactions ...........................................................................................
Precious metals (excluding gold) related transactions ....................................................
Other commodity related transactions.............................................................................
Credit default swaps........................................................................................................
Reduction in credit equivalent amount due to netting ..........................................................
Net credit equivalent amount................................................................................................
Collateral amount .................................................................................................................
Qualifying financial collateral...........................................................................................
Qualifying real estate collateral .......................................................................................

Net credit equivalent amount

Billions of yen

2008

¥ 4,796.6
3,977.6
8,774.2
4,116.3
4,244.9
—
2.1
—
289.5
121.4
4,535.8
4,238.4
170.7
60.2
110.4

2007

¥ 2,901.8
3,931.1
6,832.9
2,932.7
3,616.1
—
2.3
—
265.1
16.7
3,253.1
3,579.8
216.6
122.7
93.9

(after taking into account credit risk mitigation effect of collateral) ....................................

¥ 4,238.4

¥ 3,579.8

Note: The net credit equivalent amount was the same before and after taking into account the CRM effect of collateral as the foundation IRB approach and simple

approach of the standardized approach have been adopted.

(2) Notional Principal Amounts of Credit Derivatives

March 31

Billions of yen

2008

2007

Notional principal
amount

Of which for CRM

Notional principal
amount

Of which for CRM

Protection purchased ...................................................
Protection provided ......................................................

¥ 1,559.0
1,134.7

¥302.5
—

¥1,260.4
1,067.4

¥ 226.0
—

Note: The “Notional principal amount” is defined as the total of “amounts subject to calculation of credit equivalents” and “amounts employed for CRM.”

152

SMFG 2008

■ Securitization Exposures

1. Risk Management Policies and Procedures

Definition of securitization exposure has been clarified in order to properly identify, measure, evaluate and report risks, and a risk
management department, independent of business units, has been established to centrally manage risks from recognizing
securitization exposures to measuring, evaluating and reporting credit risk-weighted assets.

The Group takes one of the following positions in securitization transactions.

● Originator (a direct or indirect originator of underlying assets or a sponsor of an ABCP conduit or a similar program that acquires

exposures from third-party entities)
Investor

●

● Other (for example, provider of swaps for preventing a mismatch between the dividend on trust beneficiary rights and cash flows

generated by underlying assets on which the rights are issued)

2. Credit Risk-Weighted Asset Calculation Methodology

There are three methods of calculating the credit risk-weighted asset amount of securitization exposures subject to the IRB approach:
the external ratings-based approach, supervisory formula, and the internal assessment approach. The methods are used as follows.
● First, securitization exposures are examined and the external ratings-based approach is applied to qualifying exposures.
● The remaining exposures are examined and the supervisory formula is applied to qualifying exposures.
● The remaining exposures are deducted from capital.

The credit risk-weighted asset amount for securitization exposures subject to the standardized approach is calculated mostly using

ratings published by qualifying rating agencies or based on weighted average risk weights of underlying assets as stipulated in the
Notification.

3. Accounting Policy on Securitization Transactions

Accounting treatment of securitization of financial assets is as follows. Extinguishment of financial assets is recognized when the
contractual rights over the financial assets is exercised, forfeited or control over the rights is transferred to a third-party, and the
difference between the book value of the financial assets and the amount received/paid is recorded as the term’s gain/loss. When the
control over the contractual rights is not deemed to have been transferred, the securitization transaction is treated as a financial
transaction such as a mortgage loan.

When a portion of financial assets satisfies the extinguishment condition, the extinguishment of the said portion is recognized and

the difference between the book value of the extinguished portion and the amount received/paid is recorded as the term’s gain/loss.
The book value of the extinguished portion is calculated by allocating the book value of the financial assets based on the proportion of
the financial assets’ fair value that the extinguished portion represents.

Further, the remaining portion is subject to self-assessment, and write-offs and provisions are made as necessary.

4. Qualifying External Ratings Agencies

When computing credit risk-weighted asset amounts for securitization exposures using the external rating-based approach under the
IRB approach or standardized approach, the risk weights are determined by mapping the ratings of qualifying rating agencies to the
risk weights stipulated in the Notification. The qualifying rating agencies are Rating and Investment Information, Inc. (R&I), Japan
Credit Rating Agency, Ltd. (JCR), Moody’s Investors Service, Inc. (Moody’s), Standard & Poor’s Ratings Services (S&P), and Fitch
Ratings Ltd. (Fitch). When more than one rating is available for an exposure, the second smallest risk weight is used.

SMFG 2008 153

5. Portfolio

(1) Securitization Transactions as Originator
A. As Originator (excluding as Sponsor)
(A) Underlying Assets

Claims on corporates ...................................
Mortgage loans ............................................
Retail loans (excluding mortgage loans)......
Other claims.................................................
Total .............................................................

March 31, 2008

Underlying asset amount

Billions of yen

Fiscal 2007

Asset
transfer
type

¥ 171.3
1,751.7
64.1
148.4
¥ 2,135.5

Total

¥ 273.8
1,751.7
260.2
295.7
¥ 2,581.4

Synthetic
type

Securitized
amount

Default
amount

Loss
amount

Gains/losses
on sales

¥102.5
—
196.1
147.3
¥445.9

¥ 657.9
312.3
154.2
129.5
¥ 1,253.9

¥ 7.5
0.6
43.4
0.1
¥ 51.6

¥ 0.3
0.1
6.6
1.0
¥ 8.1

¥ —
15.9
—
0.0
¥15.9

March 31, 2007

Underlying asset amount

Billions of yen

Fiscal 2006

Asset
transfer
type

Total

Synthetic
type

Securitized
amount

Default
amount

Loss
amount

Gains/losses
on sales

¥ 330.2
1,550.9
450.4
174.7
¥ 2,506.3

¥ 181.5
1,550.9
—
5.9
¥ 1,738.4

¥148.7
—
450.4
168.8
¥768.0

¥ 520.5
789.7
341.2
0.4
¥ 1,651.7

¥ 13.3
0.3
20.1
0.0
¥ 33.7

¥ 4.3
0.0
2.1
0.2
¥ 6.6

¥ —
26.8
—
—
¥26.8

Notes: 1. The above amounts include the amount of underlying assets securitized during the term without entailing securitization exposure.

2. The “Default amount” is the total of underlying assets which are past due three months or more and defaulted underlying assets.
3. Other claims” includes claims on PFI (Private Finance Initiative) businesses and lease fees.
4. Following Articles 230 and 248 of the Notification, there were no amounts that represent exposure to products subject to early call provisions to investors.
5. There were no credit risk-weighted assets calculated using Supplementary Provision 15 of the Notification.

(B) Securitization Exposures

a. Underlying Assets by Asset Type

March 31

Claims on corporates.......................
Mortgage loans................................
Retail loans

(excluding mortgage loans) ..........
Other claims ....................................
Total.................................................

b. Risk Weights

March 31

Billions of yen

2008

2007

Term-end
balance

To be deducted
from capital

Increase in
capital
equivalent

Term-end
balance

To be deducted
from capital

Increase in
capital
equivalent

¥ 139.8
170.1

80.0
90.9
¥ 480.8

¥ 5.3
35.9

12.8
20.5
¥74.4

¥ —
44.0

—
—
¥44.0

¥183.4
142.7

111.1
8.4
¥445.6

¥ 1.7
29.9

6.8
8.4
¥ 46.7

¥ —
40.1

—
—
¥ 40.1

Billions of yen

2008

2007

Term-end
balance

Required
capital

Term-end
balance

Required
capital

20% or less....................................................................................
100% or less..................................................................................
650% or less..................................................................................
1250% or less................................................................................
Capital deduction...........................................................................
Total ..............................................................................................

¥ 264.5
5.7
2.0
—
208.6
¥ 480.8

¥ 2.2
0.1
0.7
—
74.4
¥77.5

¥175.1
76.7
2.0
—
191.8
¥445.6

¥ 1.2
1.0
0.7
—
46.7
¥ 49.6

154

SMFG 2008

B. As Sponsor
(A) Underlying Assets

March 31, 2008

Underlying asset amount

Billions of yen

Fiscal 2007

Total

¥790.6
3.8
54.1
64.9
¥913.5

Asset
transfer
type

¥790.6
3.8
54.1
64.9
¥913.5

Synthetic
type

Securitized
amount

¥ —
—
—
—
¥ —

¥ 6,305.8
—
142.4
214.1
¥ 6,662.3

Billions of yen

Default
amount

¥156.8
0.6
1.2
1.5
¥160.1

Loss
amount

¥154.9
0.6
3.3
1.3
¥160.1

March 31, 2007

Underlying asset amount

Fiscal 2006

Total

¥ 1,014.3
—
37.1
124.2
¥ 1,175.6

Asset
transfer
type

¥ 1,014.3
—
37.1
124.2
¥ 1,175.6

Synthetic
type

Securitized
amount

Default
amount

¥ —
—
—
—
¥ —

¥ 5,898.5
—
0.5
175.0
¥ 6,074.0

¥206.0
—
0.0
1.5
¥207.5

Loss
amount

¥204.8
—
0.0
1.3
¥206.0

Claims on corporates ....................................
Mortgage loans .............................................
Retail loans (excluding mortgage loans) .......
Other claims ..................................................
Total ..............................................................

Notes: 1. The above amounts include the amount of underlying assets securitized during the term without entailing securitization exposure.

2. The “Default amount” is the amount of defaulted underlying assets and those past due three months or more.
3. The “Default amount” and “Loss amount” when acting as a sponsor of securitization of customer claims are estimated using the following methods and

alternative data are used as it is difficult to obtain relevant data in a timely manner because the underlying assets are recovered by the customer.
(1) “Default amount” estimation method

● For securitization transactions subject to the external ratings-based approach, the amount is estimated based on information on underlying assets

obtainable from customers, etc.

● For securitization transactions subject to the supervisory formula, the amount is estimated based on obtainable information on, or default rate of,

each obligor. Further, when it is difficult to estimate the amount using either method, it is conservatively estimated by assuming that the
underlying asset is a default asset.

(2) “Loss amount” estimation method

● For securitization transactions subject to the external ratings-based approach, the amount is the same amount as the default amount estimated

conservatively in (1) above.

● For securitization transactions subject to supervisory formula, when expected loss ratios of defaulted underlying assets can be determined, the

amount is estimated using the ratios. When it is difficult to determine the ratios, the amount is the same amount as the default amount estimated
in (1) above.

4. “Other claims” includes lease fees.
5. Following Articles 230 and 248 of the Notification, there were no amounts that represent exposure to products subject to early call provisions to investors.
6. There were no credit risk-weighted assets calculated using Supplementary Provision 15 of the Notification.

(B) Securitization Exposures

a. Underlying Assets by Asset Type

March 31

Claims on corporates.......................
Mortgage loans................................
Retail loans

(excluding mortgage loans) ..........
Other claims ....................................
Total.................................................

Note: “Other claims” includes lease fees.

Billions of yen

2008

2007

Term-end
balance

To be deducted
from capital

Increase in
capital
equivalent

Term-end
balance

To be deducted
from capital

Increase in
capital
equivalent

¥ 608.1
3.8

54.1
59.7
¥ 725.7

¥ 0.1
—

—
—
¥ 0.1

¥ —
—

—
—
¥ —

¥807.7
—

37.1
100.3
¥945.1

¥ 13.1
—

—
—
¥ 13.1

¥ —
—

—
—
¥ —

SMFG 2008 155

b. Risk Weights

March 31

Billions of yen

2008

2007

Term-end
balance

Required
capital

Term-end
balance

Required
capital

¥ 634.1
91.5
—
—
0.1
¥ 725.7

¥ 3.9
2.6
—
—
0.1
¥ 6.6

¥809.4
103.1
18.9
—
13.7
¥945.1

¥ 5.6
3.7
2.4
—
13.1
¥ 24.9

(2) Securitization Transactions in which the Group is the Investor

A. Securitization Exposures
(A) Underlying Assets by Asset Type

March 31

Claims on corporates.......................
Mortgage loans................................
Retail loans

(excluding mortgage loans) ..........
Other claims ....................................
Total.................................................

Billions of yen

2008

2007

Term-end
balance

To be deducted
from capital

Increase in
capital
equivalent

Term-end
balance

To be deducted
from capital

Increase in
capital
equivalent

¥ 339.5
—

15.0
24.6
¥ 379.1

¥66.0
—

—
10.6
¥76.6

¥ —
—

—
—
¥ —

¥301.6
379.3

17.8
124.0
¥822.8

¥ 76.9
—

—
1.3
¥ 78.2

¥ —
—

—
—
¥ —

Notes: 1. “Other claims” includes securitization products.

2. There were no credit risk-weighted assets calculated using Supplementary Provision 15 of the Notification.

(B) Risk Weights

March 31

Billions of yen

2008

2007

Term-end
balance

Required
capital

Term-end
balance

Required
capital

¥ 228.4
35.0
0.6
—
115.1
¥ 379.1

¥ 1.5
1.6
0.1
—
76.6
¥79.9

¥668.5
26.2
—
—
128.1
¥822.8

¥ 4.7
1.6
—
—
78.2
¥ 84.4

■ Equity Exposures in Banking Book
1. Risk Management Policy and Procedures

Securities in the banking book are properly managed, for example, by setting upper limits on the allowable amount of risk under the
market or credit risk management framework selected according to their holding purpose and risk characteristics. For securities held as
“other securities,” the upper limits are also set in terms of price fluctuation risk.

Regarding stocks of subsidiaries, assets and liabilities of subsidiaries are managed on a consolidated basis, and risks related to stocks of
affiliates are recognized separately. Their risk as equity is not measured as upper limits on the allowable amount of risk are set for stocks of
subsidiaries and affiliates, and the limits are established within the “risk capital limit” of SMFG, taking into account the financial and
business situations of the subsidiaries and affiliates.

2. Valuation of Securities in Banking Book and Other Significant Accounting Policies

Stocks of subsidiaries and affiliates are carried at amortized cost using the moving-average method. Other securities with market prices are
carried at their average market prices during the final month of the fiscal year. Securities other than these securities are carried at their fiscal
year-end market prices (cost of securities sold is calculated using primarily the moving-average method) and those with no available market
prices are carried at cost using the moving-average method.

Net unrealized gains (losses) on other securities, net of income taxes, are reported as a component of “net assets.” Derivative transactions

are carried at fair value.

156

SMFG 2008

3. Consolidated Balance Sheet Amounts and Fair Values

March 31

Listed equity exposures ....................................................
Stocks of subsidiaries and affiliates and

equity exposures other than above ................................
Total ..................................................................................

Billions of yen

2008

2007

Balance sheet
amount

Fair value

Balance sheet
amount

Fair value

¥ 2,913.3

¥ 3,980.3

670.5
¥ 3,583.8

—
—

519.0
¥ 4,499.3

—
—

4. Gains (Losses) on Sale and Devaluation of Stocks of Subsidiaries and Affiliates and Equity Exposures

Gains (losses) ................................................................................................................................
Gains on sale ............................................................................................................................
Losses on sale ..........................................................................................................................
Devaluation ...............................................................................................................................

Note: The above amounts are “gains (losses) on stocks and other securities” in the consolidated statements of income.

Billions of yen

Fiscal 2007

Fiscal 2006

¥ (7.1)
61.5
5.7
62.8

¥ 44.7
62.8
1.5
16.6

5. Unrealized Gains (Losses) Recognized on Consolidated Balance Sheet but Not on Consolidated Statements of Income

March 31

Unrealized gains (losses) recognized on

Billions of yen

2008

2007

consolidated balance sheet but not on consolidated statements of income ...............................

¥ 940.3

¥ 1,982.6

Note: The above amount is for stocks of Japanese companies and foreign stocks with market prices.

6. Unrealized Gains (Losses) Not Recognized on Consolidated Balance Sheet or Consolidated Statements of Income

March 31

Unrealized gains (losses) not recognized on

Billions of yen

2008

2007

consolidated balance sheet or consolidated statements of income ............................................

¥ (24.4)

¥ 65.7

Note: The above amount is for stocks of affiliates with market prices.

SMFG 2008 157

■ Exposure Balance by Type of Assets, Geographic Region, Industry and Residual Term
1. Exposure Balance by Type of Asset, Geographic Region and Industry

March 31, 2008

Loans, etc.

Bonds

Derivatives

Other

Total

Billions of yen

Domestic operations (excluding offshore banking accounts)
Manufacturing............................................................
Agriculture, forestry, fishery and mining ....................
Construction ..............................................................
Transport, information, communications and utilities ...
Wholesale and retail..................................................
Financial and insurance ............................................
Real estate ................................................................
Services.....................................................................
Local municipal corporations.....................................
Other industries .........................................................
Subtotal .....................................................................

Overseas operations and offshore banking accounts

Sovereigns ................................................................
Financial institutions ..................................................
C&I companies ..........................................................
Others........................................................................
Subtotal .....................................................................
Total................................................................................

¥ 8,402.1
317.4
1,745.7
4,173.9
6,719.0
10,540.0
8,580.1
6,681.9
2,592.3
19,574.7
¥69,327.1

335.1
3,651.6
10,512.3
1,956.8
¥16,455.8
¥85,782.9

130.0
0.1
38.0
127.6
49.3
965.7
263.0
107.5
604.9
12,709.5
¥14,995.5

791.2
337.1
223.9
290.9
¥ 1,643.0
¥16,638.5

¥ 2,453.7
61.3
147.6
757.4
682.3
273.5
285.5
658.2
6.1
4,935.8
¥10,261.4

—
0.0
—
347.3
347.3
¥
¥10,608.8

¥ 11,536.1
392.6
1,947.2
5,236.2
8,095.9
13,109.9
9,184.5
7,543.5
3,207.8
37,226.2
¥ 97,479.8

1,135.7
4,938.8
11,113.9
2,597.9
¥ 19,786.2
¥ 117,266.0

¥ 550.3
13.7
16.0
177.3
645.4
1,330.7
55.9
95.9
4.4
6.2
¥2,895.8

9.4
950.1
377.7
2.9
¥1,340.1
¥4,235.9

Billions of yen

March 31, 2007

Loans, etc.

Bonds

Derivatives

Other

Total

Overseas operations and offshore banking accounts

¥ 8,135.7
179.1
1,772.1
3,793.9
6,982.3
7,593.2
8,766.4
7,010.9
1,133.8
18,412.1
¥63,779.4

315.8
2,473.8
8,964.0
2,075.2
¥13,828.8
¥77,608.2

132.7
1.1
57.9
137.7
64.3
1,275.2
89.1
65.6
750.2
7,912.8
¥10,486.5

82.5
243.9
258.8
350.4
¥
935.5
¥11,422.0

¥ 400.5
9.0
14.6
97.7
433.6
1,217.3
40.0
87.5
1.1
160.7
¥2,461.9

8.4
805.3
263.0
41.3
¥1,117.9
¥3,579.8

¥ 2,846.4
66.7
185.3
880.6
685.1
322.3
262.0
515.1
2.6
3,771.8
¥ 9,537.9

—
0.0
—
293.8
¥ 293.8
¥ 9,831.6

¥ 11,515.2
255.9
2,029.8
4,909.9
8,165.2
10,408.0
9,157.5
7,679.1
1,887.7
30,257.3
¥ 86,265.7

406.6
3,523.0
9,485.7
2,760.7
¥ 16,176.0
¥ 102,441.7

Notes: 1. The above amounts are exposure amounts after credit risk mitigation.

2. The above amounts do not include equity exposures and credit risk-weighted assets under Article 145 of the Notification.
3. “Loans, etc.” includes loans, commitments and off-balance sheet assets except other derivatives, and “Other” includes equity exposures and standardized approach applied

funds.

4. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated

subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries.

158

SMFG 2008

2. Exposure Balance by Type of Asset and Residual Term

March 31, 2008

Loans, etc.

Bonds

Derivatives

Other

Total

Billions of yen

To 1 year ................................................................................
More than 1 year to 3 years...................................................
More than 3 years to 5 years .................................................
More than 5 years to 7 years .................................................
More than 7 years ..................................................................
No fixed maturity ....................................................................
Total........................................................................................

¥ 27,614.5
13,973.9
12,047.3
4,836.6
21,409.4
5,901.1
¥ 85,782.9

¥ 3,003.3
4,301.5
5,687.3
873.0
2,773.3
—
¥16,638.5

¥ 653.2
1,452.3
1,048.3
476.4
605.7
—
¥4,235.9

Billions of yen

373.7
927.9
1,158.8
310.1
191.8
7,646.5
¥ 10,608.8

¥ 31,644.8
20,655.6
19,941.8
6,496.0
24,980.2
13,547.7
¥ 117,266.0

March 31, 2007

Loans, etc.

Bonds

Derivatives

Other

Total

¥ 22,237.0
11,762.0
11,734.2
4,508.1
20,365.9
7,000.9
¥ 77,608.2

¥ 3,747.2
1,628.6
1,451.8
1,382.4
3,212.1
—
¥ 11,422.0

¥ 389.4
1,232.6
1,058.7
431.9
467.2
—
¥ 3,579.8

¥ 176.6
503.0
621.5
162.9
110.4
8,257.2
¥ 9,831.6

¥ 26,550.3
15,126.2
14,866.1
6,485.3
24,155.7
15,258.2
¥ 102,441.7

Notes: 1. The above amounts are exposure amounts after credit risk mitigation.

applied funds.

4. “No fixed maturity” includes exposures not classified by residual term.

3. Term-end Balance of Exposures Past Due 3 Months or More or Defaulted and Their Breakdown

(1) By Geographic Region

March 31

Domestic operations (excluding offshore banking accounts)....................................................
Overseas operations and offshore banking accounts...............................................................
Asia ......................................................................................................................................
North America ......................................................................................................................
Other regions .......................................................................................................................
Total ..........................................................................................................................................

Billions of yen

2008

¥ 1,759.4
140.7
42.0
83.2
15.4
¥ 1,900.0

2007

¥ 1,948.3
135.0
81.9
42.3
10.8
¥ 2,083.3

Notes: 1. The above amounts are credits subject to self-assessment, including mainly off-balance sheet credits to obligors categorized as “Substandard Borrowers” or lower

under self-assessment.

2. The above amounts include partial direct write-offs (direct reductions).
3. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic

consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas
consolidated subsidiaries, and the term-end balances are calculated based on the obligor’s domicile country.

SMFG 2008 159

(2) By Industry

March 31

Domestic operations (excluding offshore banking accounts)

Manufacturing ......................................................................................................................
Agriculture, forestry, fishery and mining...............................................................................
Construction.........................................................................................................................
Transport, information, communications and utilities...........................................................
Wholesale and retail ............................................................................................................
Financial and insurance .......................................................................................................
Real estate...........................................................................................................................
Services ...............................................................................................................................
Other industries....................................................................................................................
Subtotal................................................................................................................................

Overseas operations and offshore banking accounts

Financial institutions.............................................................................................................
C&I companies.....................................................................................................................
Others ..................................................................................................................................
Subtotal................................................................................................................................
Total ..........................................................................................................................................

Billions of yen

2008

2007

¥ 180.4
7.1
153.4
96.9
288.6
38.2
325.1
347.0
322.6
¥ 1,759.4

1.0
139.7
—
¥ 140.7
¥ 1,900.0

¥ 123.6
6.3
196.4
155.8
170.5
16.6
556.5
452.2
270.4
¥ 1,948.3

1.1
133.9
—
¥ 135.0
¥ 2,083.3

Notes: 1. The above amounts are credits subject to self-assessment, including mainly off-balance sheet credits to obligors categorized as “Substandard Borrowers” or lower

under self-assessment.

consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas
consolidated subsidiaries.

4. Term-end Balances of General Reserve for Possible Loan Losses, Specific Reserve for Possible Loan Losses and Loan Loss Reserve for Specific

Overseas Countries
(1) By Geographic Region

March 31

2008

¥ 593.7
0.0
819.6
738.5
81.1
10.1
68.1
2.9
¥1,413.3

Billions of yen

2007

Increase (decrease)

¥ 683.6
1.9
693.7
661.0
32.7
14.1
12.9
5.7
¥1,379.2

¥ (89.9)
(1.9)
125.9
77.5
48.4
(4.0)
55.2
(2.8)
¥ 34.1

Notes: 1. “Specific reserve for possible loan losses” includes partial direct write-offs (direct reductions).

2. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic

160

SMFG 2008

(2) By Industry

March 31

General reserve for possible loan losses.........................................................
Loan loss reserve for specific overseas countries ...........................................
Specific reserve for possible loan losses.........................................................
Domestic operations (excluding offshore banking accounts) .....................
Manufacturing........................................................................................
Agriculture, forestry, fishery and mining ................................................
Construction ..........................................................................................
Transport, information, communications and utilities ............................
Wholesale and retail ..............................................................................
Financial and insurance.........................................................................
Real estate ............................................................................................
Services.................................................................................................
Other industries .....................................................................................
Overseas operations and offshore banking accounts ................................
Financial institutions ..............................................................................
C&I companies ......................................................................................
Others....................................................................................................
Total.................................................................................................................

2008

¥ 593.7
0.0
819.6
738.5
76.3
1.3
71.3
49.2
142.7
19.2
110.9
135.2
132.4
81.1
0.9
80.2
—
¥1,413.3

Billions of yen

2007

Increase (decrease)

¥ 683.6
1.9
693.7
661.0
43.6
0.4
37.5
48.7
82.7
8.7
157.7
154.6
127.1
32.7
0.9
31.8
—
¥1,379.2

¥ (89.9)
(1.9)
125.9
77.5
32.7
0.9
33.8
0.5
60.0
10.5
(46.8)
(19.4)
5.3
48.4
(0.0)
48.4
—
¥ 34.1

Notes: 1. “Specific reserve for possible loan losses” includes partial direct write-offs (direct reductions).

2. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic

consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas
consolidated subsidiaries.

5. Loan Write-Offs by Industry

Billions of yen

Fiscal 2007

Fiscal 2006

Domestic operations (excluding offshore banking accounts)

Manufacturing ...........................................................................................................................
Agriculture, forestry, fishery and mining....................................................................................
Construction..............................................................................................................................
Transport, information, communications and utilities................................................................
Wholesale and retail .................................................................................................................
Financial and insurance ............................................................................................................
Real estate................................................................................................................................
Services ....................................................................................................................................
Other industries.........................................................................................................................
Subtotal.....................................................................................................................................

Overseas operations and offshore banking accounts

Financial institutions..................................................................................................................
C&I companies..........................................................................................................................
Others .......................................................................................................................................
Subtotal.....................................................................................................................................
Total ...............................................................................................................................................

¥ 25.7
0.3
16.0
11.3
42.6
(0.0)
(3.6)
24.7
18.7
¥135.7

0.0
6.0
—
6.0
¥
¥141.8

¥ 10.6
0.0
5.6
14.9
21.3
1.1
(10.2)
16.2
25.4
¥ 84.9

¥ 0.0
(3.5)
—
¥ (3.5)
¥ 81.4

Note: “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated

subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries.

SMFG 2008 161

■ Market Risk
1. Scope

The following approaches are used to calculate market risk equivalent amounts.
(1) Internal Models Approach

General market risk of SMBC, Sumitomo Mitsui Banking Corporation Europe Limited, SMBC Capital Markets, Inc., SMBC Capital
Markets Limited, and SMBC Derivative Products Limited

(2) Standardized Measurement Method

● Specific risk
● General market risk of consolidated subsidiaries other than SMBC, Sumitomo Mitsui Banking Corporation Europe Limited, SMBC

Capital Markets, Inc., SMBC Capital Markets Limited, and SMBC Derivative Products Limited

2. Valuation Method Corresponding to Transaction Characteristics

All assets and liabilities held in the trading book - therefore, subject to calculation of the market risk equivalent amount - are transactions with
high market liquidity. Securities and monetary claims are carried at the fiscal year-end market price, and derivatives such as swaps, futures and
options are stated at amounts that would be settled if the transactions were terminated at the consolidated balance sheet date.

■ Interest Rate Risk in Banking Book

Interest rate risk in the banking book fluctuates significantly depending on the method of recognizing maturity of demand deposits (such as
current accounts and ordinary deposits which funds can be withdrawn on demand) and the method of predicting early withdrawal from fixed-
term deposits and prepayment of consumer loans. Key assumptions made by SMBC in measuring interest rate risk in the banking book are as
follows.

1. Method of Recognizing Maturity of Demand Deposits

The total amount of demand deposits expected to remain with the bank for the long term (with 50% of the lowest balance during the past 5
years as the upper limit) is recognized as a core deposit amount and interest rate risk is measured for each maturity with 5 years as the
maximum term (the average is 2.5 years).

2. Method of Estimating Early Withdrawal from Fixed-term Deposits and Prepayment of Consumer Loans

The rate of early withdrawal from fixed-term deposits and the rate of prepayment of consumer loans are estimated and the rates are used to
calculate cash flows used for measuring interest rate risk.

VaR Results

Billions of yen

Fiscal 2007

Fiscal 2006

Trading

Banking

Trading

Banking

Fiscal year-end..................................................................
Maximum...........................................................................
Minimum............................................................................
Average.............................................................................

¥ 2.2
4.3
2.1
2.8

¥ 23.3
59.3
20.9
31.3

¥ 2.9
4.7
2.1
2.9

¥ 47.6
78.9
36.8
51.6

Notes: 1. The VaR results for a one-day holding period with a one-sided confidence interval of 99.0%, computed daily using historical simulation method based on data collected

over a four-year period.

2. Includes principal consolidated subsidiaries.
3. Figures for the trading book exclude specific risks.

162

SMFG 2008

■ Operational Risk
1. Operational Risk Equivalent Amount Calculation Methodology

SMFG has adopted the Advanced Measurement Approaches (AMA) for exposures as of March 31, 2008. The following consolidated
subsidiaries have also adopted the AMA, and the remaining consolidated subsidiaries have adopted the Basic Indicator Approach (BIA).
Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Card Company, Limited, The Japan Research Institute, Limited, SMBC
Friend Securities Co., Ltd., The Japan Net Bank, Limited, SMBC Guarantee Co., Ltd., SMBC Finance Service Co., Ltd., THE MINATO
BANK, LTD., SMBC Center Service Co., Ltd., SMBC Delivery Service Co., Ltd., SMBC Green Service Co., Ltd., SMBC International
Business Co., Ltd., SMBC International Operations Co., Ltd., SMBC Loan Business Service Co., Ltd., SMBC Market Service Co., Ltd.,
SMBC Loan Administration and Operations Service Co., Ltd., and Sumitomo Mitsui Banking Corporation Europe Limited.
Further, the following companies that have adopted the BIA are making preparations to adopt the AMA: Kansai Urban Banking

Corporation (for exposures as of September 30, 2008), Sumitomo Mitsui Finance and Leasing Company, Limited (for exposures as of March
31, 2009), and QUOQ Inc. (for exposures as of March 31, 2011).

2. Outline of the AMA

An outline of the AMA for operational risk management is described in the section on Risk Management. In this section, we would like to
present an explanation of the preparation of data that is input into the quantification model and the verification of scenario assessment using
internal loss data, external loss data, and Business Environment and Internal Control Factors (BEICFs). We will also give an outline of the
methodology for measuring the operational risk equivalent amount (“required capital”) using the quantification model.

Internal loss data

External loss data

BEICFs

B. Verification

(1) Scenario Analysis through
Risk Control Assessments

(2) Measurement using
quantification model

A. Data input

Risk mitigation initiatives

(1) Scenario Analysis through Risk Control Assessments

A. Preparation of Data Input into the Quantification Model

In order to estimate the frequency of occurrence of “low-frequency and high-severity” events, which is the purpose of risk control
assessment, we estimate the loss frequency in terms of four loss amounts (¥100 million, ¥1 billion, ¥5 billion, and ¥10 billion) for
each scenario, then input the total amount by loss event type for each entity, namely, SMFG (consolidated), SMBC (consolidated),
and SMBC (nonconsolidated), into the quantification model.

At SMFG and SMBC, by using a different assessment method according to loss event type and organizational classification, we

obtain a proper grasp of operational risk profile of the Group. The following section provides typical calculation examples for
scenarios of SMBC domestic business offices.

SMFG 2008 163

(A) Deriving and Scoring Scenarios

a. Deriving Scenarios

In order to grasp all potential risks of a business/product, we first identify “business processes & /products” stipulated in the
“Common Procedures of Operations”. Then, we derive all possible scenarios for the generation of a loss event of prescribed
magnitude by breaking down the operation process of each “business processes &/ products” into “processing types”.

We evaluate each individual scenario on an operation process basis.

Classification of Business, Products and Processing Type (Example)

(Example)

Product

Business

Exchange forward contract

Conclusion of exchange forward contract

Operation process

(a) Explanation to customer

Explanation

(b) Request for preparation of application form

Receipt and check

Agreements and contracts

(d) Conclusion of the deal with Market Operations

Internal transfer

Promotion Department

(e) Entry of contract implementation form

System entries

(f) Exchange of forward contract

Issuance, notification and reporting

(a) Explanation

(b) Attribute confirmation

(d) Issuance, notification and reporting

(e) Internal transfer

Processing type

(f) Application, decision and authorization

(g) Agreements and contracts

(h) Preparation of vouchers, etc. and making entries

(i) System entries

(j) Management during contract period

(k) Safekeeping, depositing and withdrawal

b. Scenario Assessment

In order to assess scenarios, it is necessary to quantify loss frequency and amount for each scenario. At SMBC, in order to
quantify loss frequency for each scenario, we execute risk control assessments on each scenario.

In risk assessment, in order to measure the easiness of loss occurrence in each operation process before taking into account

the risk management (control) situation, we set standards for various assessment items - transaction volume, volatility of
transaction volume, time limits and so on - and the operation process is scored on how well the standards are met.

Risk Scoring (Examples)

Perspective

Risk Items

What to Assess

Score

Easiness of
making an error

(a) Transaction volume

Largeness of annual processing volume

(b) Volatility of transaction volumes

Degree of concentration of processing on specific dates

Shortness of deadlines and degree of urgency

(d) Complexity of process

Degree of processing complexity, processing volume per task

(e) Complexity of products

Product complexity

Easiness of an error leading
to a clerical accident

(f) Deal with outside party

(g) Booking of business products

Easiness of error in transferring actual items/funds to customer/other bank leading to
loss accident
Easiness of error in handling of, or in notifying actions to be taken on, products with
market risk leading to loss event

164

SMFG 2008

Control assessment is executed from the perspective of preventive control and detection & recovery control. We set
standards for various items - establishment of manuals and procedures, processing authority and pre-process check, post-
process check, and so on - and the operation process is scored on how well the standards are met.

Control Assessment (Examples)

Perspective

Risk Items

What to Assess

Score

Design of procedures

(a) Establishment of manuals and procedures

Whether rules/ procedures/etc. have been documented or updated

(b) Details of manuals and procedures

Whether there are rules for accurate processing execution without omissions and whether
they are effective (excluding those included in below three risk items)

Authority and verification

Assess processing authority, pre-process check

(d) Post-process check

Assess post-process check and accident detection measures
(assess only preventive measures)

System situation

(e) Degree of system processing

System processing

(B) Quantifying Loss Frequency of Each Scenario

a. Generation of “Average Frequency Table” for Domestic Business Offices

To quantify loss frequency for domestic branches, we assume future loss frequency is similar to historical loss frequency. And
we generate an average frequency table, which is used to estimate future loss frequency. The average frequency table comprises
rows of total risk score and columns of total control score and the number of loss occurrences in a one-year period for each
combination of scores is given.

As risk and control assessment items are expected to have different loss occurrence contribution ratios, we analyze their loss

occurrence contribution ratios for each assessment item by executing a regression analysis and weight each assessment item.

Average Frequency Table (Example)

Total Score

2.0

2.4

2.8

3.2

3.6

4.0

Control

(Times/Year)

Risk

5.5

4.5

3.5

2.5

1.5

0.5

5.5

4.5

3.5

2.5

1.5

0.5

2.40

b. Quantifying Loss Frequency of Each Scenario

Total risk assessment score and total control assessment score are calculated for each scenario taking into account the weight of
each assessment item described above. Then, the loss frequency of each scenario (the number of times the loss event described
in the scenario occurs during a one-year period) is estimated using the average frequency table.

In order to quantify the loss amount for each scenario, we generate loss distribution for each “business process & product” by
using the historical transaction data of SMBC. Specifically, we assume that the historical transaction volume follows a
logarithmic normal (log-normal) distribution for each “business process & product” and generate the log-normal distribution.

SMFG 2008 165

(D) Estimating the Frequency of Occurrence of the “Low-Frequency and High-Severity” Events

In order to estimate the probability of occurrence in terms of four loss amounts (¥100 million, ¥1 billion, ¥5 billion, and ¥10
billion) for each scenario, we use a cumulative distribution function estimated for each scenario.

Because we assume the log-normal distribution to each “business process & product”, in case one loss event occurs in a one-year
period, maximum potential loss is the cumulative distribution function based on log-normal distribution. Therefore, in this case,
we estimate the probability of occurrence of four loss amounts by substituting each loss amount for the maximum loss amount of
cumulative distribution function.

In case that one loss event occurs in a one-year period, the method described above is followed. However, in case that several

numbers of loss events occur in a one-year period, it is conceivable that the events occurred independently of each other.
Therefore, the probability of occurrence of several loss events can be calculated by the probability of one loss event raised to the
power of its loss frequency.

As we quantify the loss frequency for each scenario using the average frequency table,we are able to estimate the probability of

four loss amounts by the probability raised to the power of loss frequency derived from the frequency table.

After estimating the loss frequency in terms of the four loss amounts for each scenario, we sum results for each loss event type

and input them into the quantification model for SMFG (consolidated), SMBC (consolidated), and SMBC (nonconsolidated).

B. Verification of Scenarios Using Three Data Elements

At SMFG and SMBC, the verifications of the assessments of scenarios using internal loss data, external loss data, and BEICFs
(hereinafter, “3 data elements”) is implemented quarterly. Specifically, SMFG and SMBC use these data and information and use
them to determine, on a quarterly basis, whether there are any scenarios that have been omitted and whether the assessments of the
scenarios are appropriate to ensure the completeness and appropriateness of the scenarios.

(A) Reassessment of Scenarios Using Internal Loss Data

Both SMFG and SMBC, in principle, compile internal loss data on all gross loss amounts of at least one yen. From the data,
internal loss data which fulfill the established criteria are drawn, and the content of the related loss events is considered; then,
a judgment is made regarding whether or not to review the scenario in question. Specifically, we pose a number of issues to
consider, such as whether the scenario exists at SMBC, and, if so, whether the deviation between the actual loss and the assessed
value of the scenario is within the tolerance range. In considering these issues, we follow a set pattern of logical reasoning in
making a decision on whether the scenario should be revised.

When we decide it is necessary to revise the scenario, we make a reassessment based on the internal loss data. In this process,
we consider redeveloping and reassessing the scenario and other related matters to ensure that the internal loss data is properly
reflected in the scenario.

(B) Reassessment of Scenarios Using External Loss Data

At SMFG and SMBC, we have a database containing more than 5,000 cases of external losses that have been taken from the mass
media, including newspapers, and purchased from data vendors. A framework has been created to enable the sharing of this
database across the Group.

From this database, we draw external loss data which fulfill the established criteria, and the content of the related loss events is

considered; then, a judgment is made regarding whether or not to revise the scenario in question. Specifically, we pose a number
of issues to consider, such as whether the scenarios in question exist at SMBC, and, if so, whether the deviation between the
actual loss and the assessed value of the scenario is within the tolerance range. In considering these issues, we follow a set pattern
of logical reasoning in making a decision on whether the scenario should be reviewed.

When we decide it is necessary for the scenario to be reviewed, we make a reassessment based on the external loss data. In this

process, we consider deriving and reassessing the scenario and other related matters to ensure that the external loss data is
properly reflected in the scenario.

166

SMFG 2008

At SMFG and SMBC, we compile data related to changes in laws and regulations, changes in internal rules, policies and
procedures, and new business, products and process, all of which are business environment and internal control factors (BEICFs).
We use this information to consider periodically whether our scenarios should be reconsidered, and, even for events other than
those listed previously, when major changes occur in the business environment, our systems provide, as necessary, for the
consideration of whether scenarios should be revised.

When we decide it is necessary for the scenario to be reviewed, we make a reassessment based on the information related to
changes and other factors in BEICFs. In this process, we consider redeveloping and reassessing the scenario and other related
matters to ensure that the changes in BEICFs are properly reflected in our scenarios.

(2) Measurement using Quantification Models

When calculating operational risk using the quantification model, firstly, we input seven-year historical internal loss data and the data
on the frequency of “low-frequency and high-severity” events in terms of four loss amounts, which have been estimated through risk
control assessments, and generate a loss distribution. Secondly, we use this distribution to estimate the maximum loss amount with a
99.0 percentile confidence interval (hereinafter referred to as 99.0% VaR). Thirdly, we multiply this maximum loss by a number, which
we call “the risk capital conversion factor”, to estimate 99.9% VaR.Finally, we calculate required capital by using a multiplier that has
been determined based on the number of times in which actual losses have exceeded predicted losses through the use of back testing. In
estimation of the aggregated loss distribution, we need to estimate the loss severity and frequency distribution.

In addition, we confirm whether the quantification model is functioning appropriately and conservatively in measuring operational

risk by implementing various types of sensitivity analysis and verification tests.

The following chart puts the main points of this quantification method in order and explains how the results of measurement are

verified.

A. Estimation with the Quantification Model

(B) Estimation of the Loss Frequency
Distribution

Sampling of the number
of losses from
the distribution

Reiteration

Aggregated Loss Distribution

Frequency x Severity

Calculation of
annual loss amount

(
f
r
e
q
u
e
n
c
y
)

P
r
o
b
a
b

i
l
i
t
y

o
f

o
c
c
u
r
r
e
n
c
e

0.4

0.3

0.2

0.1

(C)

Times the risk capital
conversion factor

99.0

99.9

Total

Amount of annual losses

(A) Estimation of Loss Severity
Distribution

Sampling of the amount of
losses of the cases drawn
from the distribution

(D) Calculation of required capital

B. Verification of Quantification Model

(A) Verification of Quantification Accuracy

(B) Implementation of Regular Verification Process

(Pre-testing, Back testing)

SMFG 2008 167

A. Measurement using the Quantification Model
(A) Estimation of Loss Severity Distribution

a. Smoothed Bootstrap Method

We employ the “smoothed bootstrap” method for generating the loss distribution.The smoothed bootstrap method is one of
the methods that connect the distribution, of the realized risk and the potential risk event, smoothly. Under this method, no
assumptions are made about the shape of the distribution as a whole, but assumptions are on the individual distribution
related to realized individual losses. Therefore, this method takes advantage of the widely known parametric method as well as
the non-parametric one.

Under the non-parametric method, if we use historical internal loss data to generate the loss severity distribution, we are
not able to create the samples outside the actual observation points, and also it is particularly difficult to create a distribution
with a fat tail. However, through the use of the method that can combine such data (on actual observations) with data on
potential risks, it becomes possible to create large losses that occur rarely (with a potential impact) and that have not actually
been found in historical internal loss data. In generating the distribution, while “high-frequency low-severity” events are based
on sufficient historical internal loss data volume, for “low-frequency high-severity” events in the tail of the distribution, the
historical internal data volume is insufficient. This approach makes it possible to reflect the severity (frequency of occurrence)
of potential risk that has been assessed in the risk control assessments. In this way, using this model, realized risks and
potential risks can be combined with congruity.

In estimating the loss distribution under this method, the Kernell function is applied to the loss data to derive “Kernell

estimate” by the pile-up of functions. In particular, the log-normal distribution is applied as the Kernell function.

b. Supplementing Results of Risk Control Assessments with Extreme Value Theory

In order to capture potential risks, a statistical method known as Extreme Value Theory is used in addition to the results of
risk control assessments. Extreme Value Theory is the statistical assessment method by which risks that may occur in the
future accompanying larger losses than the actually observed ones in the internal loss data can be quantified, and fulfills the
role of supplementing the risk control assessments.

Gaining a grasp of realized risk

Collection of internal loss data

(Example)

Period

Amount of loss

Capturing potential risks

Statistical estimates from internal loss data
(Extreme Value Theory)

Estimates from risk control assessments

Loss occurrence for the last 7

years (or period actually collected)

2003 / 1H

2004 / 1H

2005 / 1H

2005 / 2H

5,000,000

10,000,000

8,000,000

15,000,000

7,000,000

Estimates of potential risk

that may emerge

(Example)

Amount of loss

Frequency of occurrence

¥100 million or more

Once in 5 years

¥1 billion or more

Once in 10 years

¥5 billion or more

Once in 50 years

¥10 billion or more

Once in 100 years

Body part of the “high- frequency low- severity”
loss severity distribution

Tail part of the “low- frequency high- severity”
loss severity distribution

Combination of the loss severity distributions

Smoothed bootstrap method

Body part

Tail part

Amount of losses

¥100
million
〜

¥1
billion
〜

¥5
billion
〜

¥10
billion
〜

F
r
e
q
u
e
n
c
y
o
f

o
c
c
u
r
r
e
n
c
e

168

SMFG 2008

(B) Estimation of Loss Frequency Distribution

The Poisson distribution is used for generating the loss frequency distribution. To estimate the Poisson distribution, it is
necessary to estimate the average number of annual losses, but in this model, we do not simply take the annual average of all cases
of losses for the entire period (several fiscal years) but instead, estimate the annual average number of loss cases for each fiscal year
individually. Through this approach, we are able to take account of the deviations in the historical incidence of losses for different
periods and are able to estimate loss cases that may occur in the future more appropriately.

We calculate 99.0% VaR from the estimated aggregated loss distribution, and then multiply the risk capital conversion
factor (cid:2) (gamma) in order to compute 99.9% VaR. By introducing (cid:2) it is unnecessary to estimate 99.9% VaR directly which can
be estimated with lower accuracy, and it provides with stable estimation results by estimating 99.0% VaR which can be
estimated with higher accuracy.

The factor (cid:2) means the ratio between 99.9% VaR and 99.0% VaR. In other words, it is the risk profile of the loss distribution

and an indicator for the characteristics of the tail part of the distribution. The risk profile of the loss distribution is different for
each loss event type, by which the calculation is performed. In addition, we have verified statistically that it could differ among
SMFG (consolidated), SMBC (consolidated), and SMBC (nonconsolidated). To reflect their characteristics, we set a different value
of (cid:2) for each entity. There is a tendency for (cid:2) to become smaller, etc., when there is a distribution of large expected losses or
when the tail of the distribution is highly dense.

When setting (cid:2) initially, we conduct an analysis, taking into account the possibility of changes in the risk profiles of many
types of loss distributions, and set values that maintain the stability and the conservativeness of capital. In addition, we assess
changes in the risk profiles of the most recent loss distributions, including the present one, and, when changes are above a certain
level, we conduct a review of the (cid:2) values. This makes it possible to keep values of (cid:2) appropriate to changes in the risk profile of
the loss distribution and calculate stable values of required capital.

(D) Calculation of Required Capital

We calculate required capital by multiplying the 99.9% VaR calculated in the previous section by the multiplier for each loss
event type that has been determined based on the number of breaches in back testing. As will be mentioned later, back testing
is conducted periodically, and, when realized risk is found to be greater than the risks estimated with the quantification model
(back testing excess), we take necessary steps, such as multiplying by the multiplier determined through prior analysis, to
maintain the conservativeness of required capital estimates.

We then added the required capital amounts calculated for each loss event type to compute the required capital for SMFG

(consolidated), SMBC (consolidated), and SMBC (nonconsolidated).

Please note that in calculating required capital, we do not subtract expected losses.

B. Verification of the Quantification Model

We conduct a range of sensitivity and verification tests to ensure that the measurement results of the quantification model are
appropriate (quantification accuracy) and to confirm that our model is capable of measuring the amounts corresponding to the
maximum losses from operational risk that may be incurred for a one year holding period, with a one-sided 99.9 percentile confidence
interval. In the following paragraphs, we would like to explain the methods for assessing the quantification accuracy of our
measurements and the framework we have in place for regular verifications.

(A) Verification of Quantification Accuracy

We have confirmed the reliability of the quantification model through a verification process from various perspectives.
Specifically, we obtain a quantitative grasp of the possibilities for variation in measurement results that may arise from
preconditions or assumptions made at the time the models were designed. In particular, we assess the possibilities for
underestimating required capital and the possible magnitude of such underestimates. Then, in our periodic verification
framework, which is described below, we make analyses of how to compensate for such underestimates. We apply our
understanding of the possibilities for underestimation to the multiplier derived from back testing, and, if the accuracy of the
quantification model deteriorates, we introduce a framework for making adjustments in the multiplier to avoid underestimating
the amount of required capital.

SMFG 2008 169

(B) Implementation of Regular Verification Process

To confirm the appropriateness of the quantification model on a continuing basis, we conduct a regular verification process.
Specifically, there are two types of verifications. One is back testing, which enables us to make a comprehensive judgment on the
appropriateness of measurement results, and the other is pre-testing, in which we verify the accuracy of the quantification model
prior to conducting actual measurements. In the following paragraphs, we present an explanation of these two test types.

a. Back Testing

In conducting back tests, we compare the estimates made by the quantification model with the maximum loss arising from
business activities to verify on an ex post fact basis whether the measurement results obtained from the model are conservative
enough and appropriate. When actual losses become greater than the losses estimated by the model (actual losses exceed the
estimate when back tests are conducted), we apply the multiplier factor in accordance with the number of excesses in order to
ensure conservativeness of quantification results.

Back testing is a well-known method for verifying comprehensively the appropriateness of VaR (statistical) models. We
employ the test to obtain the maximum loss amount with the given confidence interval which the tests work effectively. By
comparing the test results with the losses that actually occur, we increase the effectiveness of back testing.

b. Pre-testing

Pre-testing is conducted periodically, prior to use of the model for actual measurements, to verify whether the possibility of
underestimation is increasing (model risk is rising), since it is possible that the multiplier used in back testing may lead to
underestimation. As a result of pre-test verifications, we are able to confirm, on a continuing basis, whether the multiplier
used in back testing are conservative enough or whether model risk is emerging.

3. Usage of Insurance to Mitigate Risk

SMFG had not taken measures to mitigate operational risk through insurance coverage for exposures as of March 31, 2008.

4. Required Capital by Operational Risk Measurement Method

The amount of required capital to cover operational risk by measurement method was as follows for exposures as of March 31, 2008.

(¥ billion)

Amount of Required Capital

Advanced Measurement Approaches

Basic Indicator Approach

Total

224.5

43.7

268.2

170

SMFG 2008

Income Analysis (Consolidated)

Sumitomo Mitsui Banking Corporation and Subsidiaries

Operating Income, Classified by Domestic and Overseas Operations

2008

2007

Millions of yen

Year ended March 31

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

Interest income ............................................
Interest expenses.........................................
Net interest income ............................................
Trust fees ...........................................................
Fees and commissions (income) .................
Fees and commissions (expenses) .............
Net fees and commissions.................................
Trading profits ..............................................
Trading losses..............................................
Net trading income.............................................
Other operating income ...............................
Other operating expenses............................
Net other operating income (expenses).............

¥1,518,852
503,975
1,014,876
3,710
479,366
108,379
370,986
449,958
15,242
434,715
208,285
459,726
(251,440)

¥ 668,838
457,941
210,897
—
71,996
10,537
61,459
30,848
16,423
14,425
18,986
1,550
17,436

¥ (65,060)
(48,276)
(16,784)
—
(1,309)
(1,047)
(261)
(31,665)
(31,665)
—
(2)
(0)
(2)

¥2,122,630
913,640
1,208,989
3,710
550,053
117,869
432,184
449,141
—
449,141
227,270
461,276
(234,006)

¥1,411,367
419,280
992,086
3,482
518,851
104,406
414,445
118,694
10,720
107,974
179,271
225,707
(46,435)

¥593,969
408,872
185,097
—
59,223
7,353
51,870
21,459
12,780
8,679
18,294
10,759
7,535

¥ (55,102)
(31,373)
(23,728)
—
(639)
(345)
(293)
(21,564)
(21,564)
—
(394)
(174)
(219)

¥1,950,234
796,779
1,153,455
3,482
577,435
111,413
466,021
118,589
1,936
116,653
197,172
236,292
(39,120)

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas

operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. Income and expenses resulting from money held in trust are included in “Other income” and “Other expenses.” Therefore, “Interest expenses” are

shown after deduction of expenses (2008, ¥10 million; 2007, ¥5 million) related to the management of money held in trust.

3. Intersegment transactions are reported in the “Elimination” column.

Average Balance, Interest and Earnings Yield of Interest-Earning Assets and Interest-Bearing Liabilities
Domestic Operations

Year ended March 31

Average balance

¥ 75,205,377
52,218,671
17,931,827
632,627
67,129

2008
Interest

¥1,518,852
1,115,012
288,315
13,128
382

borrowing transactions .....................
Deposits with banks ............................

980,818
1,840,501

7,032
34,684

lending transactions ........................
Borrowed money .................................
Short-term bonds ................................
Bonds ..................................................

¥ 79,264,153
65,551,997
2,600,739
2,094,184
101,085

¥ 503,975
244,101
15,325
10,894
582

2,041,013
3,030,071
1,450
3,565,619

45,499
66,531
9
71,821

Millions of yen

Earnings yield

Average balance

2007
Interest

¥ 1,411,367
975,869
330,569
17,367
94

¥76,675,402
52,294,389
19,724,688
777,805
41,945

1,329,318
1,027,774

4,857
26,863

¥79,416,907
65,216,658
2,563,245
2,908,959
157,630

¥ 419,280
177,587
6,064
4,294
430

2,301,547
2,288,969
3,560
3,627,408

60,856
47,872
14
67,408

Earnings yield

1.84%
1.87
1.68
2.23
0.23

0.37
2.61

0.53%
0.27
0.24
0.15
0.27

2.64
2.09
0.40
1.86

2.02%
2.14
1.61
2.08
0.57

0.72
1.88

0.64%
0.37
0.59
0.52
0.58

2.23
2.20
0.68
2.01

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries.

2. In principle, average balances are calculated by using daily balances. However, some domestic consolidated subsidiaries use weekly, monthly or

semiannual balances instead.

3. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥791,342 million; 2007, ¥1,088,877

million).

SMFG 2008 171

Domestic Operations

Year ended March 31

Average balance

¥ 12,724,231
8,789,302
1,139,822
268,662
278,935

borrowing transactions .....................
Deposits with banks ............................

—
1,844,837

¥ 8,833,141
7,101,518
660,930
314,091
207,412

—
197,127
—
268,000

2008
Interest

¥ 668,838
466,604
62,162
12,827
6,661

—
71,185

¥ 457,941
256,777
36,045
12,675
6,802

—
10,436
—
17,447

Millions of yen

Earnings yield

Average balance

5.26%
5.31
5.45
4.77
2.39

—
3.86

5.18%
3.62
5.45
4.04
3.28

—
5.29
—
6.51

¥ 11,228,957
7,836,742
1,109,298
200,194
145,659

—
1,527,271

¥ 8,929,624
6,985,307
738,076
325,729
352,703

—
91,801
—
348,240

2007
Interest

¥ 593,969
401,424
62,710
10,824
7,003

—
72,910

¥ 408,872
282,707
37,618
14,520
17,923

—
2,931
—
20,930

Earnings yield

5.29%
5.12
5.65
5.41
4.81

—
4.77

4.58%
4.05
5.10
4.46
5.08

—
3.19
—
6.01

Notes: 1. Overseas operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. In principle, average balances are calculated by using daily balances. However, some overseas consolidated subsidiaries use weekly, monthly or

semiannual balances instead.

3. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥75,204 million; 2007, ¥48,320 million).

Total of Domestic and Overseas Operations

Year ended March 31

Average balance

¥ 86,842,369
60,139,056
19,071,650
901,289
346,065

2008
Interest

¥ 2,122,630
1,538,387
333,692
25,955
7,044

borrowing transactions .....................
Deposits with banks ............................

980,818
3,468,732

7,032
100,826

¥ 87,009,800
72,436,730
3,261,670
2,408,276
308,497

¥ 913,640
495,834
51,370
23,570
7,384

2,041,013
2,358,205
1,450
3,833,620

45,499
33,736
9
89,269

Millions of yen

Earnings yield

Average balance

2007
Interest

¥1,950,234
1,348,997
369,548
28,192
7,098

¥87,160,682
59,486,052
20,833,987
978,000
187,604

1,329,318
2,457,987

4,857
96,700

¥87,602,397
72,104,532
3,301,321
3,234,688
510,333

¥ 796,779
457,221
43,683
18,815
18,353

2,301,547
1,735,608
3,560
3,975,649

60,856
22,504
14
88,338

Earnings yield

2.24%
2.27
1.77
2.88
3.78

0.37
3.93

0.91%
0.63
1.32
0.58
3.60

2.64
1.30
0.40
2.22

2.44%
2.56
1.75
2.88
2.04

0.72
2.91

1.05%
0.68
1.57
0.98
2.39

2.23
1.43
0.68
2.33

Notes: 1. The figures above comprise totals for domestic and overseas operations after intersegment eliminations.

2. In principle, average balances are calculated by using daily balances. However, some consolidated subsidiaries use weekly, monthly or semiannual

balances instead.

3. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥866,367 million; 2007, ¥1,136,823

million).

172

SMFG 2008

Fees and Commissions

Millions of yen

2008

2007

Year ended March 31

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

Fees and commissions (income)................................
Deposits and loans ...............................................
Remittances and transfers....................................
Securities-related business ..................................
Agency..................................................................
Safe deposits........................................................
Guarantees...........................................................
Credit card ............................................................

¥479,366
25,285
126,743
15,118
16,044
7,140
42,864
6,878

¥ 71,996
49,217
8,568
58
—
4
4,150
—

¥ (1,309)
—
(177)
—
—
—
(393)
—

¥550,053
74,503
135,135
15,176
16,044
7,144
46,621
6,878

¥518,851
25,649
124,972
35,484
16,594
7,318
44,860
6,903

¥ 59,223
40,664
9,166
271
—
4
1,266
—

¥ (639)
—
(0)
—
—
—
(391)
—

¥577,435
66,313
134,137
35,756
16,594
7,322
45,734
6,903

Fees and commissions (expenses)............................
Remittances and transfers....................................

¥108,379
26,683

¥ 10,537
5,103

¥ (1,047)
(174)

¥117,869
31,612

¥104,406
25,135

¥ 7,353
2,262

¥ (345)
(198)

¥111,413
27,200

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas

operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. Intersegment transactions are reported in the “Elimination” column.

Trading Income

Year ended March 31

Trading profits ............................................................
Gains on trading securities ...................................
Gains on securities related to

trading transactions ...........................................
Gains on trading-related financial derivatives ...........
Others...................................................................

Millions of yen

2008

2007

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

¥449,958
652

¥ 30,848
324

¥ (31,665)
—

¥449,141
976

¥118,694
6,099

¥ 21,459
37

¥ (21,564)
—

¥118,589
6,136

2,705
439,734
6,865

228
30,296
—

—
(31,665)
—

2,934
438,365
6,865

—
109,351
3,244

—
21,422
—

—
(21,564)
—

—
109,208
3,244

Trading losses ............................................................
Losses on trading securities .................................
Losses on securities related to

trading transactions ...........................................
Losses on trading-related financial derivatives............
Others...................................................................

¥ 15,242
—

¥ 16,423
—

¥ (31,665)
—

—
15,242
—

—
16,423
—

—
(31,665)
—

—
—

—
—
—

¥ 10,720
—

¥ 12,780
—

¥ (21,564)
—

1,936
—

1,928
8,791
—

7
12,773
—

—
(21,564)
—

1,936
—
—

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas

operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. Intersegment transactions are reported in the “Elimination” column.

SMFG 2008 173

Assets and Liabilities (Consolidated)

Sumitomo Mitsui Banking Corporation and Subsidiaries

Deposits and Negotiable Certificates of Deposit
Year-End Balance

March 31

Domestic operations:

Overseas operations:

Millions of yen

2008

2007

¥ 40,937,520
21,906,417
4,076,061
66,919,999
2,307,506
¥ 69,227,505

¥ 4,613,034
1,227,907
6,793
5,847,735
817,143
¥ 6,664,878
¥ 75,892,384

¥ 41,307,135
21,273,969
3,273,252
65,854,357
1,920,747
¥ 67,775,104

¥ 5,331,444
1,006,300
8,241
6,345,986
705,470
¥ 7,051,456
¥ 74,826,561

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas

operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. Liquid deposits = Current deposits + Ordinary deposits + Savings deposits + Deposits at notice
3. Fixed-term deposits = Time deposits + Installment savings

Balance of Loan Portfolio, Classified by Industry
Year-End Balance

March 31

Domestic operations:

Millions of yen

2008

2007

Overseas operations:

¥ 5,647,304
145,627
1,358,113
3,054,126
5,319,595
5,543,367
7,755,616
6,084,951
846,982
17,796,195
¥ 53,551,882

32,848
621,385
7,826,252
940,232
¥ 9,420,719
¥ 62,972,601

10.55%
0.27
2.54
5.70
9.94
10.35
14.48
11.36
1.58
33.23
100.00%

0.35%
6.60
83.07
9.98
100.00%

—

¥ 5,594,929
139,509
1,435,549
3,035,500
5,502,101
5,169,458
7,626,700
6,371,973
648,704
17,021,236
¥52,545,664

35,783
481,228
5,977,548
577,624
¥ 7,072,185
¥59,617,850

10.65%
0.27
2.73
5.78
10.47
9.84
14.51
12.13
1.23
32.39
100.00%

0.51%
6.80
84.52
8.17
100.00%

—

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas

operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. Japan offshore banking accounts are included in overseas operations’ accounts.

174

SMFG 2008

Risk-Monitored Loans

March 31

Amount of direct reduction ..................................................................................

Note: Definition of risk-monitored loan categories

Millions of yen

2008

73,176
589,280
26,625
384,388
¥ 1,073,471

¥ 416,706

2007

60,068
488,812
22,018
476,665
¥ 1,047,566

¥ 407,910

1. Bankrupt loans: Credits for which accrued interest is not accounted in revenue; credits extended to borrowers that are undergoing bankruptcy,

corporate reorganization and rehabilitation proceedings or debtors receiving orders of disposition by suspension of business at bill clearinghouses

2. Non-accrual loans: Credits for which accrued interest is not accounted in revenue; credits, excluding loans to bankrupt borrowers and loans with

grace for interest payment to assist in corporate reorganization or to support business

3. Past due loans (3 months or more): Loans with payment of principal or interest in arrears for more than 3 months, calculated from the day following

the contractual due date, excluding borrowers in categories 1. and 2.

4. Restructured loans: Loans to borrowers in severe financial condition given certain favorable terms and conditions to assist in corporate rehabilitation

or to support business, excluding borrowers in categories 1. through 3.

Securities
Year-End Balance

March 31

Domestic operations:

Millions of yen

2008

2007

Overseas operations:

¥ 9,339,958
439,228
3,876,433
3,431,541
4,202,554
¥ 21,289,716

—
—
—
—
1,871,186
¥ 1,871,186
¥ 23,160,903

¥ 7,640,064
571,103
4,066,497
4,535,384
2,286,002
¥ 19,099,052

—
—
—
—
1,205,587
¥ 1,205,587
¥ 20,304,639

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas

operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. “Others” include foreign bonds and foreign stocks.

Trading Assets and Liabilities

2008

2007

Millions of yen

March 31

Trading assets: .................................................
Trading securities.........................................
Derivatives of trading securities ...................
Securities related to trading transactions.....
Derivatives of securities related to

trading transactions...................................
Trading-related financial derivatives ............
Other trading assets.....................................

trading transactions...................................
Trading-related financial derivatives ............
Other trading liabilities .................................

Domestic
operations

Overseas
operations

Elimination

Total

Domestic
operations

Overseas
operations

Elimination

Total

¥ 3,621,893
180,670
3,026
—

¥ 490,723
7,082
—
—

¥ (31,135)
—
—
—

¥ 4,081,480
187,753
3,026
—

¥2,890,685
12,388
373
—

10,440
2,543,384
884,370

—
483,640
—

—
(31,135)
—

10,440
2,995,890
884,370

2,344
1,778,913
1,096,664

¥ 2,310,969
18,984
3,871
—

¥ 391,720
733
—
—

¥ (31,135)
—
—
—

¥ 2,671,554
19,718
3,871
—

¥1,570,763
10,247
275
—

10,196
2,277,917
—

—
390,986
—

—
(31,135)
—

10,196
2,637,768
—

1,975
1,558,265
—

¥397,304
25,355
—
—

—
371,949
—

¥396,026
4,349
—
—

—
391,676
—

¥ (25,647)
—
—
—

¥3,262,341
37,744
373
—

—
(25,647)
—

2,344
2,125,214
1,096,664

¥ (25,647)
—
—
—

¥1,941,142
14,597
275
—

—
(25,647)
—

1,975
1,924,294
—

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas

operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries.

2. Intersegment transactions are reported in the “Elimination” column.

SMFG 2008 175

Income Analysis (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Gross Banking Profit, Classified by Domestic and International Operations

Millions of yen

Year ended March 31

Domestic
operations

2008
International
operations

Interest income....................................

¥1,172,852

¥ 702,275

Interest expenses ................................

258,227

646,082

Net interest income ..................................
Trust fees .................................................
Fees and commissions (income).........
Fees and commissions (expenses).....
Net fees and commissions .......................
Trading profits .....................................
Trading losses .....................................
Net trading income ...................................
Other operating income.......................
Other operating expenses ...................
Net other operating income (expenses) ...
Gross banking profit .................................
Gross banking profit rate (%) ...................

914,625
3,710
361,444
98,409
263,035
8,531
—
8,531
59,530
51,146
8,383
¥1,198,285

56,193
—
91,082
21,755
69,327
432,454
—
432,454
62,281
333,759
(271,477)
¥ 286,497

Total

¥ 1,866,277
[8,851]
895,458
[8,851]
970,818
3,710
452,527
120,165
332,362
440,985
—
440,985
121,812
384,906
(263,093)
¥ 1,484,783

Domestic
operations

2007
International
operations

¥1,037,393

¥669,110

133,203

635,846

904,189
3,479
385,202
95,323
289,878
4,047
162
3,885
42,813
94,305
(51,491)
¥1,149,941

33,263
2
79,969
16,431
63,538
99,671
1,936
97,735
63,912
63,902
9
¥194,548

Total

¥1,706,170
[332]
768,717
[332]
937,452
3,482
465,171
111,754
353,416
103,719
2,098
101,620
106,725
158,207
(51,482)
¥1,344,490

1.82%

1.75%

1.86%

1.74%

1.34%

1.67%

Notes: 1. Domestic operations include yen-denominated transactions by domestic branches, while international operations include foreign-currency-

denominated transactions by domestic branches and operations by overseas branches. Yen-denominated nonresident transactions and Japan
offshore banking accounts are included in international operations.

2. “Interest expenses” are shown after deduction of amounts equivalent to interest expenses on money held in trust (2008, ¥10 million; 2007, ¥5 million).
3. Figures in brackets [ ] indicate interest payments between domestic and international operations. As net interest figures are shown for interest rate

swaps and similar instruments, some figures for domestic and international operations do not add up to their sums.

4. Gross banking profit rate = Gross banking profit / Average balance of interest-earning assets x 100

Average Balance, Interest and Earnings Yield of Interest-Earning Assets and Interest-Bearing Liabilities
Domestic Operations

Year ended March 31

Interest-earning assets.............................

Loans and bills discounted ..................
Securities.............................................
Call loans.............................................
Receivables under resale agreements...
Receivables under securities

borrowing transactions .....................
Bills bought..........................................
Deposits with banks ............................

Average balance

¥ 65,570,970
[2,187,759]
46,675,889
15,123,121
317,648
25,001

2008
Interest

¥ 1,172,852
[8,851]
944,703
192,292
2,369
137

967,810
21,588
9,639

6,955
600
34

Millions of yen

Earnings yield

Average balance

1.78%

2.02
1.27
0.74
0.55

0.71
2.78
0.35

¥ 66,077,961
[171,786]
47,188,557
16,763,472
336,503
20,304

1,320,720
55,212
51,428

2007
Interest

¥1,037,393
[332]
817,842
197,538
1,151
37

4,827
102
203

Earnings yield

1.56%

1.73
1.17
0.34
0.18

0.36
0.18
0.39

Interest-bearing liabilities..........................

¥ 67,276,143

¥ 258,227

0.38%

¥ 67,955,018

¥ 133,203

0.19%

Deposits ..............................................
Negotiable certificates of deposit ........
Call money ..........................................
Payables under repurchase agreements ...
Payables under securities

lending transactions .........................
Bills sold ..............................................
Borrowed money .................................
Bonds ..................................................

57,309,691
2,538,711
2,098,638
110,193

1,095,930
—
1,901,820
2,105,556

126,555
14,781
10,190
630

5,872
—
19,738
25,297

0.22
0.58
0.48
0.57

0.53
—
1.03
1.20

57,374,302
2,666,349
1,918,389
165,270

878,167
956,126
1,540,098
2,236,416

59,125
6,183
3,731
452

2,412
220
16,532
23,297

0.10
0.23
0.19
0.27

0.27
0.02
1.07
1.04

Notes: 1. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥740,846 million; 2007,

¥1,021,949 million). “Interest-bearing liabilities” are shown after deduction of amounts equivalent to the average balance of money held in trust
(2008, ¥2,771 million; 2007, ¥2,607 million) and corresponding interest (2008, ¥10 million; 2007, ¥5 million).

2. Figures in brackets [ ] indicate the average balances of interdepartmental lending and borrowing activities between domestic and international

operations and related interest expenses. As net interest figures are shown for interest rate swaps and similar instruments, some figures for domestic
and international operations do not add up to their sums.

176

SMFG 2008

International Operations

2008

2007

Millions of yen

Year ended March 31

Average balance

Interest

Earnings yield

Average balance

Interest

Earnings yield

Interest-earning assets.............................

¥ 16,324,446

¥ 702,275

4.30%

¥ 14,513,250

¥ 669,110

4.61%

borrowing transactions .....................
Bills bought..........................................
Deposits with banks ............................

Interest-bearing liabilities..........................

Deposits ..............................................
Negotiable certificates of deposit .......
Call money ..........................................
Payables under repurchase agreements ...
Payables under securities

lending transactions ........................
Bills sold ..............................................
Borrowed money .................................
Bonds ..................................................

7,573,047
3,528,429
368,569
242,821

—
—
3,424,782

¥ 16,253,405
[2,187,759]
8,670,545
608,181
336,120
186,890

944,513
—
1,593,890
1,473,709

381,575
129,994
17,033
3,625

—
—
92,911

¥ 646,082
[8,851]
300,291
32,686
13,746
5,558

39,623
—
83,250
51,165

5.03
3.68
4.62
1.49

—
—
2.71

3.97%

3.46
5.37
4.08
2.97

4.19
—
5.22
3.47

6,371,044
4,095,307
452,724
98,709

—
—
2,281,869

¥ 14,324,084
[171,786]
8,475,843
519,589
332,255
316,813

1,389,030
—
1,359,685
1,440,949

325,518
171,500
22,351
4,026

—
—
77,519

¥ 635,846
[332]
337,174
27,561
14,986
16,071

58,357
—
67,618
50,186

5.10
4.18
4.93
4.07

—
—
3.39

4.43%

3.97
5.30
4.51
5.07

4.20
—
4.97
3.48

Notes: 1. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008, ¥78,914 million; 2007, ¥51,778 million).

2. Figures in brackets [ ] indicate the average balances of interdepartmental lending and borrowing activities between domestic and international

3. The average balance of foreign-currency-denominated transactions by domestic branches in international operations is calculated by the monthly
current method, under which the TT middle rate at the end of the previous month is applied to nonexchange transactions of the month concerned.

Total of Domestic and International Operations

Year ended March 31

Average balance

Interest-earning assets.............................
Loans and bills discounted ..................
Securities.............................................
Call loans.............................................
Receivables under resale agreements...
Receivables under securities

borrowing transactions .....................
Bills bought..........................................
Deposits with banks ............................

¥ 79,707,657
54,248,936
18,651,550
686,218
267,822

967,810
21,588
3,434,421

2008
Interest

¥1,866,277
1,326,278
322,287
19,403
3,762

6,955
600
92,946

Interest-bearing liabilities..........................
Deposits ..............................................
Negotiable certificates of deposit ........
Call money ..........................................
Payables under repurchase agreements ...
Payables under securities

¥ 81,341,789
65,980,237
3,146,892
2,434,759
297,083

¥ 895,458
426,846
47,467
23,936
6,189

2,040,443
—
3,495,710
3,579,266

45,496
—
102,988
76,463

Millions of yen

Earnings yield

Average balance

2007
Interest

¥ 1,706,170
1,143,361
369,039
23,503
4,064

4,827
102
77,722

¥ 80,419,426
53,559,601
20,858,779
789,228
119,013

1,320,720
55,212
2,333,298

¥ 82,107,317
65,850,146
3,185,938
2,250,645
482,083

¥ 768,717
396,300
33,745
18,718
16,523

2,267,198
956,126
2,899,784
3,677,365

60,770
220
84,150
73,483

Earnings yield

2.12%
2.13
1.76
2.97
3.41

0.36
0.18
3.33

0.93%
0.60
1.05
0.83
3.42

2.68
0.02
2.90
1.99

2.34%
2.44
1.72
2.82
1.40

0.71
2.78
2.70

1.10%
0.64
1.50
0.98
2.08

2.22
—
2.94
2.13

Notes: 1. “Interest-earning assets” are shown after deduction of the average balance of noninterest earning deposits (2008,¥819,761 million; 2007, ¥1,073,727

million). “Interest-bearing liabilities” are shown after deduction of amounts equivalent to the average balance of money held in trust (2008, ¥2,771
million; 2007, ¥2,607 million) and corresponding interest (2008, ¥10 million; 2007, ¥5 million).

2. Figures in the table above indicate the net average balances of amounts adjusted for interdepartmental lending and borrowing activities between

domestic and international operations and related interest expenses.

SMFG 2008 177

Breakdown of Interest Income and Interest Expenses
Domestic Operations

Millions of yen

Year ended March 31

Interest income.........................................
Loans and bills discounted ..................
Securities.............................................
Call loans.............................................
Receivables under resale agreements....
Receivables under securities

borrowing transactions .....................
Bills bought..........................................
Deposits with banks ............................

Interest expenses .....................................
Deposits ..............................................
Negotiable certificates of deposit ........
Call money ..........................................
Payables under repurchase agreements...
Payables under securities

International Operations

Year ended March 31

lending transactions .........................
Borrowed money .................................
Bonds ..................................................

Volume-related
increase
(decrease)

¥ (494)
(653)
(9,691)
(6)
10

(552)
(31)
(82)

(30)
(0)
(23)
381
(74)

716
(110)
3,291
(436)

Volume-related
increase
(decrease)

¥ 50,809
56,435
(11,902)
(2,083)
878
22,144

¥ 43,285
(15,010)
4,756
(539)
(7,179)

(9,363)
12,100
999

Total of Domestic and International Operations

Year ended March 31

borrowing transactions .....................
Bills bought..........................................
Deposits with banks ............................

Volume-related
increase
(decrease)

¥ (1,349)
14,889
(19,578)
(1,538)
898

(552)
(31)
21,353

(443)
784
(17)
1,617
(7,085)

(10,151)
(110)
17,538
(587)

2008
Rate-related
increase
(decrease)

¥135,953
127,514
4,445
1,223
89

2,680
528
(86)

¥125,053
67,430
8,621
6,076
252

2,743
(110)
(85)
2,437

2008
Rate-related
increase
(decrease)

¥(17,643)
(377)
(29,603)
(3,234)
(1,279)
(6,751)

¥(33,049)
(21,873)
367
(700)
(3,333)

(9,370)
3,530
(19)

2008
Rate-related
increase
(decrease)

¥ 161,456
168,028
(27,172)
(2,562)
(1,199)

2,680
528
(6,130)

¥ 127,183
29,762
13,740
3,600
(3,248)

(5,123)
(110)
1,298
3,567

Note: Volume/rate variance is prorated according to changes in volume and rate.

178

SMFG 2008

Volume-related
increase
(decrease)

2007
Rate-related
increase
(decrease)

Net
increase
(decrease)

¥135,459
126,860
(5,246)
1,217
99

2,127
497
(169)

¥125,023
67,429
8,597
6,458
178

3,459
(220)
3,206
2,000

402
20,326
(13,816)
0
(1)

(39)
(3)
12

¥ (1,860)
194
(231)
(3)
(1)

0
(84)
7,902
(2,358)

Millions of yen

Net
increase
(decrease)

¥ 33,165
56,057
(41,505)
(5,318)
(401)
15,392

¥ 10,235
(36,883)
5,124
(1,240)
(10,512)

(18,733)
15,631
979

Volume-related
increase
(decrease)

¥53,903
55,744
1,020
5,794
(1,236)
(124)

¥51,712
35,042
19,049
6,920
6,227

(14,233)
645
3,873

Millions of yen

Net
increase
(decrease)

¥ 160,107
182,917
(46,751)
(4,100)
(301)

2,127
497
15,223

¥ 126,740
30,546
13,722
5,218
(10,334)

(15,274)
(220)
18,837
2,980

Volume-related
increase
(decrease)

¥25,620
48,167
(18,666)
2,847
(1,966)

(39)
(3)
925

¥ (6,084)
7,416
(1,268)
201
1,603

(9,529)
(84)
21,774
(2,211)

¥ 38,697
14,071
24,173
1,087
36

4,254
99
191

¥ 80,642
47,431
5,562
3,661
446

2,322
191
(7,937)
1,033

2007
Rate-related
increase
(decrease)

¥173,784
62,364
40,481
5,162
903
27,189

¥153,386
86,705
1,674
2,871
3,491

14,477
6,432
2,681

2007
Rate-related
increase
(decrease)

¥254,003
104,340
70,525
9,196
1,667

4,254
99
26,343

¥302,800
161,957
27,323
13,248
8,560

12,096
191
(14,733)
7,441

Net
increase
(decrease)

¥ 39,100
34,397
10,356
1,087
35

4,214
95
203

¥ 78,782
47,625
5,331
3,658
445

2,322
106
(35)
(1,325)

Net
increase
(decrease)

¥227,688
118,109
41,501
10,956
(333)
27,065

¥205,098
121,748
20,723
9,791
9,718

243
7,077
6,555

Net
increase
(decrease)

¥279,624
152,507
51,858
12,044
(298)

4,214
95
27,268

¥296,716
169,373
26,055
13,449
10,164

2,566
106
7,041
5,230

Fees and Commissions

Year ended March 31

Fees and commissions (income)..............
Deposits and loans..............................
Remittances and transfers ..................
Securities-related business .................
Agency ................................................
Safe deposits.......................................
Guarantees..........................................

Domestic
operations

¥ 361,444
10,720
97,341
13,592
13,094
6,688
22,734

Fees and commissions (expenses) ..........
Remittances and transfers ..................

¥ 98,409
20,109

Trading Income

Millions of yen

2008
International
operations

¥ 91,082
41,739
28,311
1,291
—
—
6,567

¥ 21,755
9,538

Total

¥ 452,527
52,459
125,653
14,883
13,094
6,688
29,302

¥ 120,165
29,647

Domestic
operations

¥385,202
10,717
96,938
21,874
14,085
6,855
22,054

¥ 95,323
19,071

Millions of yen

Year ended March 31

Trading profits ..........................................
Gains on trading securities..................
Gains on securities related to

trading transactions ..........................

Gains on trading-related

financial derivatives ..........................
Others..................................................

Trading losses ..........................................
Losses on trading securities................
Losses on securities related to

trading transactions ..........................

Losses on trading-related

financial derivatives ..........................
Others .................................................

Domestic
operations

¥ 8,531
652

2008
International
operations

¥ 432,454
—

Total

¥ 440,985
652

—

2,934

—
7,878

¥ —
—

—

—
—

429,520
—

429,520
7,878

—
—

—

—
—

—

—
—

Domestic
operations

¥4,047
—

—

—
4,047

¥ 162
162

—

—
—

Note: Figures represent net gains after offsetting income against expenses.

Net Other Operating Income (Expenses)

2007
International
operations

¥79,969
32,022
27,389
1,391
—
—
6,775

¥16,431
5,927

2007
International
operations

¥99,671
—

—

99,671
—

¥ 1,936
—

1,936

—
—

Total

¥465,171
42,739
124,327
23,265
14,085
6,855
28,829

¥111,754
24,999

Total

¥103,719
—

—

99,671
4,047

2,098
162

1,936

—
—

Year ended March 31

Net other operating income (expenses) ...
Gains (losses) on bonds......................
Gains (losses) on derivatives ..............
Gains (losses) on foreign exchange

Millions of yen

Domestic
operations

¥ 8,383
(10,007)
3,046

2008
International
operations

¥ (271,477)
(20,051)
3,767

Total

¥ (263,093)
(30,058)
6,813

Domestic
operations

¥(51,491)
(74,703)
(1,449)

2007
International
operations

¥
9
(37,709)
(16,156)

Total

¥ (51,482)
(112,413)
(17,606)

transactions........................................

—

(252,589)

—

55,243

General and Administrative Expenses

Year ended March 31

Salaries and related expenses............................................................................
Retirement benefit cost .......................................................................................
Welfare expenses ...............................................................................................
Depreciation........................................................................................................
Rent and lease expenses ...................................................................................
Building and maintenance expenses ..................................................................
Supplies expenses..............................................................................................
Water, lighting, and heating expenses................................................................
Traveling expenses.............................................................................................
Communication expenses...................................................................................
Publicity and advertising expenses.....................................................................
Taxes, other than income taxes..........................................................................
Others .................................................................................................................
Total ....................................................................................................................

Millions of yen

2008

¥183,791
(1,610)
29,216
52,247
45,003
7,152
6,297
4,998
3,638
7,351
14,476
40,092
267,335
¥659,992

2007

¥162,778
(309)
26,816
49,671
47,863
5,301
5,451
4,876
3,057
7,048
12,714
35,017
249,528
¥609,816

Note: Because expenses reported on page 29 exclude nonrecurring losses, they are not reconciled with the figures reported in the above table.

SMFG 2008 179

Deposits (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Deposits and Negotiable Certificates of Deposit
Year-End Balance

March 31

Domestic operations:

Millions of yen

2008

2007

International operations:

¥ 38,810,626
18,564,178
1,167,168
58,541,973
2,209,667
¥ 60,751,641

¥ 4,074,876
916,959
2,883,450
7,875,286
755,906
¥ 8,631,193
¥ 69,382,834

63.9%
30.6
1.9
96.4
3.6
100.0%

47.2%
10.6
33.4
91.2
8.8
100.0%
—

¥ 39,134,235
18,280,780
607,734
58,022,750
1,911,160
¥ 59,933,911

¥ 4,847,481
720,700
2,644,069
8,212,251
663,174
¥ 8,875,426
¥ 68,809,338

65.3%
30.5
1.0
96.8
3.2
100.0%

54.6%
8.1
29.8
92.5
7.5
100.0%
—

Notes: 1. Liquid deposits = Current deposits + Ordinary deposits + Savings deposits + Deposits at notice

2. Fixed-term deposits = Time deposits + Installment savings

Average Balance

Year ended March 31

Domestic operations:

Millions of yen

2008

2007

International operations:

¥ 38,317,885
18,407,942
583,864
57,309,691
2,538,711
¥ 59,848,403

¥ 4,864,807
1,003,417
2,802,319
8,670,545
608,181
¥ 9,278,726
¥ 69,127,129

¥ 38,595,455
18,211,722
567,125
57,374,302
2,666,349
¥ 60,040,652

¥ 4,747,817
893,630
2,834,395
8,475,843
519,589
¥ 8,995,432
¥ 69,036,085

Notes: 1. Liquid deposits = Current deposits + Ordinary deposits + Savings deposits + Deposits at notice

2. Fixed-term deposits = Time deposits + Installment savings
3. The average balance of foreign-currency-denominated transactions by domestic branches in international operations is calculated by the monthly

current method.

Balance of Deposits, Classified by Type of Depositor

March 31

Millions of yen

2008

2007

Individual.............................................................................................................
Corporate ............................................................................................................
Total ....................................................................................................................

¥ 33,987,919
30,538,230
¥ 64,526,149

52.7%
47.3
100.0%

¥ 33,623,712
29,057,052
¥ 62,680,764

53.6%
46.4
100.0%

Notes: 1. Figures are before adjustment on interoffice accounts in transit.

2. Negotiable certificates of deposit are excluded.
3. Accounts at overseas branches and Japan offshore banking accounts are excluded.

180

SMFG 2008

Balance of Investment Trusts, Classified by Type of Customer

March 31

Millions of yen

2008

¥ 2,974,007
176,591
¥ 3,150,598

2007

¥3,421,470
123,922
¥3,545,392

Note: Balance of investment trusts is recognized on a contract basis and measured according to each fund’s net asset balance at the fiscal year-end.

Balance of Time Deposits, Classified by Maturity

March 31

Less than three months ......................................................................................
Fixed interest rates .......................................................................................
Floating interest rates ...................................................................................
Others ...........................................................................................................
Three — six months............................................................................................
Fixed interest rates .......................................................................................
Floating interest rates ...................................................................................
Others ...........................................................................................................
Six months — one year.......................................................................................
Fixed interest rates .......................................................................................
Floating interest rates ...................................................................................
Others ...........................................................................................................
One — two years ...............................................................................................
Fixed interest rates .......................................................................................
Floating interest rates ...................................................................................
Others ...........................................................................................................
Two — three years..............................................................................................
Fixed interest rates .......................................................................................
Floating interest rates ...................................................................................
Others ...........................................................................................................
Three years or more ...........................................................................................
Fixed interest rates .......................................................................................
Floating interest rates ...................................................................................
Others ...........................................................................................................
Total ...................................................................................................................
Fixed interest rates .......................................................................................
Floating interest rates ...................................................................................
Others ............................................................................................................

Note: The figures above do not include installment savings.

2008

¥ 6,233,757
5,370,359
100
863,297
3,753,558
3,713,423
3,000
37,135
5,249,056
5,195,489
40,550
13,016
1,574,862
1,560,535
11,750
2,576
1,337,092
1,263,600
73,059
432
1,332,765
850,967
481,296
500
¥ 19,481,091
17,954,375
609,756
916,959

Millions of yen

2007

¥ 5,779,472
5,120,459
—
659,012
3,848,742
3,817,056
—
31,685
4,864,342
4,840,188
1,200
22,954
1,483,625
1,466,005
13,650
3,970
1,468,884
1,454,359
12,050
2,474
1,556,364
1,102,449
453,312
602
¥19,001,432
17,800,519
480,212
720,700

SMFG 2008 181

Loans (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Balance of Loans and Bills Discounted
Year-End Balance

March 31

Domestic operations:

Millions of yen

2008

2007

Loans on notes ..............................................................................................
Loans on deeds .............................................................................................
Overdrafts ......................................................................................................
Bills discounted ..............................................................................................
Subtotal..........................................................................................................

International operations:

¥ 2,061,876
35,965,609
9,622,647
285,790
¥ 47,935,924

491,480
8,421,557
97,013
11,837
¥ 9,021,889
¥ 56,957,813

¥ 2,460,937
35,242,150
9,190,227
368,778
¥47,262,094

587,967
5,802,753
95,220
8,404
¥ 6,494,346
¥53,756,440

Average Balance

Year ended March 31

Domestic operations:

Millions of yen

2008

2007

International operations:

¥ 2,197,327
34,625,555
9,572,162
280,843
¥ 46,675,889

530,865
6,935,439
96,039
10,702
¥ 7,573,047
¥ 54,248,936

¥ 2,606,379
35,279,808
8,994,841
307,527
¥47,188,557

568,081
5,676,262
118,873
7,826
¥ 6,371,044
¥53,559,601

Note: The average balance of foreign-currency-denominated transactions by domestic branches in international operations is calculated by the monthly

current method.

Balance of Loans and Bills Discounted, Classified by Purpose

March 31

Millions of yen

2008

2007

Funds for capital investment ...............................................................................
Funds for working capital ....................................................................................
Total ....................................................................................................................

¥ 20,934,771
36,023,042
¥ 56,957,813

36.8%
63.2
100.0%

¥ 20,710,260
33,046,180
¥ 53,756,440

38.5%
61.5
100.0%

Breakdown of Loans and Bills Discounted, Classified by Collateral

March 31

Securities ............................................................................................................
Commercial claims..............................................................................................
Commercial goods ..............................................................................................
Real estate..........................................................................................................
Others .................................................................................................................
Subtotal...............................................................................................................
Guaranteed .........................................................................................................
Unsecured...........................................................................................................
Total ....................................................................................................................

2008

670,902
1,124,816
—
6,834,925
648,222
9,278,868
21,143,991
26,534,953
¥ 56,957,813

Millions of yen

2007

765,605
1,078,115
—
6,685,582
329,637
8,858,940
21,732,934
23,164,565
¥53,756,440

182

SMFG 2008

Balance of Loans and Bills Discounted, Classified by Maturity

March 31

One year or less..................................................................................................
One — three years..............................................................................................
Floating interest rates ....................................................................................
Fixed interest rates ........................................................................................
Three — five years..............................................................................................
Floating interest rates ....................................................................................
Fixed interest rates ........................................................................................
Five — seven years ............................................................................................
Floating interest rates ....................................................................................
Fixed interest rates ........................................................................................
More than seven years .......................................................................................
Floating interest rates ....................................................................................
Fixed interest rates ........................................................................................
No designated term.............................................................................................
Floating interest rates ....................................................................................
Fixed interest rates ........................................................................................
Total ....................................................................................................................

Note: Loans with a maturity of one year or less are not classified by floating or fixed interest rates.

2008

¥ 9,041,643
8,589,738
6,813,129
1,776,609
8,610,480
6,770,462
1,840,018
3,565,191
2,823,756
741,434
17,431,098
16,482,691
948,407
9,719,661
9,719,661
—
¥ 56,957,813

Millions of yen

2007

¥ 8,772,225
7,741,633
6,048,170
1,693,463
7,843,601
6,118,653
1,724,948
3,287,700
2,692,523
595,176
16,825,830
15,862,230
963,599
9,285,448
9,285,448
—
¥53,756,440

Balance of Loan Portfolio, Classified by Industry

March 31

Domestic offices:

Millions of yen

2008

2007

Overseas offices:

¥ 5,284,513
138,440
1,153,752
2,891,612
4,902,333
6,083,560
6,310,993
5,453,700
780,942
15,877,739
¥ 48,877,589

19,835
679,195
6,790,929
590,262
¥ 8,080,224
¥ 56,957,813

10.8%
0.3
2.4
5.9
10.0
12.4
12.9
11.2
1.6
32.5
100.0%

0.3%
8.4
84.0
7.3
100.0%
—

¥ 5,236,097
132,196
1,224,951
2,886,168
5,089,297
5,675,905
6,369,243
5,742,376
592,238
15,242,033
¥ 48,190,509

19,029
287,898
5,038,808
220,195
¥ 5,565,931
¥ 53,756,440

10.9%
0.3
2.5
6.0
10.6
11.8
13.2
11.9
1.2
31.6
100.0%

0.3%
5.2
90.5
4.0
100.0%
—

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches). Overseas operations comprise the operations of SMBC’s

overseas branches.

2. Japan offshore banking accounts are included in overseas offices’ accounts.

Loans to Individuals/Small and Medium-Sized Enterprises

March 31

Total domestic loans (A) .....................................................................................
Loans to individuals, and small and medium-sized enterprises (B) ....................
(B) / (A) ...............................................................................................................

Millions of yen

2008

¥ 48,877,589
36,129,519

73.9%

2007

¥48,190,509
36,276,238

75.3%

Notes: 1. The figures above exclude the outstanding balance of loans at overseas branches and of Japan offshore banking accounts.

2. Small and medium-sized enterprises are individuals or companies with capital stock of ¥300 million or less, or an operating staff of 300 or fewer
employees. (Exceptions to these capital stock and staff restrictions include wholesalers: ¥100 million, 100 employees; retailers: ¥50 million, 50
employees; and service industry companies: ¥50 million, 100 employees.)

SMFG 2008 183

Consumer Loans Outstanding

March 31

Consumer loans..................................................................................................
Housing loans ................................................................................................
Residential purpose ..................................................................................
Others ............................................................................................................

Millions of yen

2008

¥ 14,581,772
13,647,753
10,033,842
934,018

2007

¥14,492,814
13,557,521
9,918,884
935,292

Note: Housing loans include general-purpose loans used for housing purposes as well as housing loans and apartment house acquisition loans.

Breakdown of Reserve for Possible Loan Losses

Year ended March 31, 2008

General reserve for possible loan losses.....................................

Specific reserve for possible loan losses.....................................

For nonresident loans.............................................................

Loan loss reserve for specific overseas countries .......................
Total.............................................................................................

Amount of direct reduction...........................................................

Millions of yen

Balance at
beginning of
the fiscal year

Increase
during
the fiscal year

Decrease during the fiscal year

Objectives

Others

Balance at
end of
the fiscal year

¥527,819
[2,987]
144,800
[23]
12,670
[19]
1,941
¥674,562
[3,011]

¥295,552
[2,762]

¥ 430,919

—

¥527,819*

¥430,919

189,084

47,319

97,481*

189,084

28,394

6,034

6,636*

28,394

0
¥ 620,004

—
¥ 47,319

1,941*
¥627,242

0
¥620,004

¥333,811

*Transfer from reserves by reversal or origination method
Note: Figures in brackets [ ] indicate foreign exchange translation adjustments.

Year ended March 31, 2007

Millions of yen

Balance at
beginning of
the fiscal year

Increase
during
the fiscal year

Decrease during the fiscal year

Objectives

Others

Balance at
end of
the fiscal year

General reserve for possible loan losses.....................................

¥ 574,302

¥ 530,807

—

¥ 574,302*

¥ 530,807

Specific reserve for possible loan losses.....................................

For nonresident loans.............................................................

Loan loss reserve for specific overseas countries .......................
Total.............................................................................................

[(1,766)]

241,566

[(19)]

18,096

[(19)]

2,354
¥ 818,223

[(1,786)]

144,824

141,100

100,465*

144,824

12,690

1,720

16,375*

12,690

1,941
¥ 677,573

—
¥ 141,100

2,354*
¥ 677,123

1,941
¥ 677,573

Amount of direct reduction...........................................................

¥ 604,309

¥ 298,314

[(687)]

*Transfer from reserves by reversal or origination method
Note: Figures in brackets [ ] indicate foreign exchange translation adjustments.

Write-off of Loans

Year ended March 31

Write-off of loans.................................................................................................

Note: Write-off of loans include the amount of direct reduction.

Specific Overseas Loans

March 31

Indonesia ............................................................................................................
Argentina.............................................................................................................
Total ....................................................................................................................
Ratio of the total amounts to total assets............................................................
Number of countries............................................................................................

Millions of yen

2008

¥121,801

2007

¥ 50,468

Millions of yen

2008

¥ —
4
¥ 4
0.00%
1

2007

¥ 32,574
3
¥ 32,578

0.03%
2

184

SMFG 2008

Risk-Monitored Loans

March 31

Amount of direct reduction ..................................................................................

Note: Definition of risk-monitored loan categories

Millions of yen

2008

¥ 48,734
437,699
23,747
260,405
¥ 770,587

¥ 291,246

2007

¥ 33,754
357,632
20,543
309,133
¥ 721,064

¥ 266,873

1. Bankrupt loans: Credits for which accrued interest is not accounted in revenue; credits extended to borrowers that are undergoing bankruptcy,

corporate reorganization and rehabilitation proceedings or debtors receiving orders of disposition by suspension of business at bill clearinghouses

2. Non-accrual loans: Credits for which accrued interest is not accounted in revenue; credits, excluding loans to bankrupt borrowers and loans with

grace for interest payment to assist in corporate reorganization or to support business

3. Past due loans (3 months or more): Loans with payment of principal or interest in arrears for more than 3 months, calculated from the day following

the contractual due date, excluding borrowers in categories 1. and 2.

4. Restructured loans: Loans to borrowers in severe financial condition given certain favorable terms and conditions to assist in corporate rehabilitation

or to support business, excluding borrowers in categories 1. through 3.

Problem Assets Based on the Financial Reconstruction Law

March 31

Amount of direct reduction ..................................................................................

2008

117,757
402,028
284,153
803,939
63,928,140
¥ 64,732,080

333,811

2007

108,893
300,097
329,677
738,667
60,542,238
¥61,280,906

298,314

Millions of yen

Note: Definition of problem asset categories

These assets are disclosed based on the provisions of Article 7 of the Financial Reconstruction Law (Law No.132 of 1998) and classified into the 4
categories based on financial position and business performance of obligors in accordance with Article 6 of the Law. Assets in question include private
placement bonds, loans and bills discounted, foreign exchanges, accrued interest, and advance payment in “other assets,” customers’ liabilities for
acceptance and guarantees, and securities lent under the loan for consumption or leasing agreements.
1. Bankrupt and quasi-bankrupt assets: Credits to borrowers undergoing bankruptcy, corporate reorganization, and rehabilitation proceedings, as well

as claims of a similar nature

2. Doubtful assets: Credits for which final collection of principal and interest in line with original agreements is highly improbable due to deterioration of

financial position and business performance, but not insolvency of the borrower

three categories above

Problem Assets Based on the Financial Reconstruction Law, and Risk-Monitored Loans

Category of borrowers under
self-assessment

Problem assets based on the Financial
Reconstruction Law

Risk-monitored loans

Total loans

Other assets

Total loans

Other assets

Bankrupt Borrowers

Effectively Bankrupt Borrowers

Bankrupt and
quasi-bankrupt assets

Potentially Bankrupt Borrowers

Doubtful assets

Borrowers Requiring Caution

Substandard loans

Normal Borrowers

(Normal assets)

Bankrupt loans

Non-accrual loans

Past due loans (3 months or more)

Restructured loans

SMFG 2008 185

Classification under Self-Assessment, Disclosure of Problem Assets, and Write-Offs/Reserves

March 31, 2008
Category of
borrowers under
self-assessment

Bankrupt Borrowers

Effectively Bankrupt
Borrowers

Potentially
Bankrupt
Borrowers

Borrowers
Requiring
Caution

Problem assets based on
the Financial Reconstruction Law

Classification under self-assessment

Classification I Classification II Classification III

Classification IV

(Billions of yen)

Reserve for possible
loan losses

Reserve ratio

Bankrupt and
quasi-bankrupt assets (1)

Portion of claims secured by

collateral or guarantees, etc. (5) Fully reserved

¥117.8

¥104.3

¥13.5

Direct
write-offs
(Note 1)

¥18.3
(Note 2)

100%
(Note 3)

Doubtful assets (2)

Portion of claims secured by
collateral or guarantees, etc. (6)

¥402.0

¥180.8

Necessary
amount
reserved

¥221.2

Substandard loans (3)
¥284.1

(Claims to substandard borrowers)

Normal Borrowers

Normal assets

¥63,928.2

Portion of substandard loans
secured by collateral or
guarantees, etc. (7)
¥85.2

Claims to borrowers requiring
caution, excluding claims to
substandard borrowers

Claims to normal
borrowers

Total (4)

¥64,732.1

(A) = (1) + (2) + (3)

¥803.9

Loan loss reserve for specific overseas countries

NPL ratio (A) / (4)
1.24%
(Note 5)

Total reserve for possible loan losses

(B) Specific reserve + General reserve
for substandard loans

Portion secured by collateral or
guarantees, etc. (C) = (5) + (6) + (7) ¥370.3

Unsecured portion
(D) = (A) - (C)

Specific
reserve

General
reserve

¥170.8
(Note 2)

77.21%
(Note 3)

General reserve
for substandard
loans ¥88.5

¥430.9

¥0.0

¥620.0

¥277.6

¥433.6

44.57%
(Note 3)

6.25%
[10.38%]
(Note 4)

14.56%
(Note 3)

0.20%
(Note 4)

Reserve ratio
(B) / (D)
64.02%
(Note 6)

Coverage ratio { (B) + (C) } / (A)

80.60%

Notes: 1. Includes amount of direct reduction totaling ¥333.8 billion.

2. Includes reserves for assets that are not subject to disclosure under the Financial Reconstruction Law. (Bankrupt/Effectively Bankrupt Borrowers:

¥4.8 billion; Potentially Bankrupt Borrowers: ¥6.6 billion)

3. Reserve ratios for claims on Bankrupt/Effectively Bankrupt Borrowers, Potentially Bankrupt Borrowers, Substandard Borrowers, and Borrowers

Requiring Caution: The proportion of each category’s total unsecured claims covered by reserve for possible loan losses.

4. Reserve ratios for claims on Normal Borrowers and Borrowers Requiring Caution (excluding claims to Substandard Borrowers): The proportion of
each category’s total claims covered by reserve for possible loan losses. The reserve ratio for unsecured claims on Borrowers Requiring Caution
(excluding claims to Substandard Borrowers) is shown in brackets.

5. Ratio of problem assets to total assets subject to the Financial Reconstruction Law
6. Reserve ratio = (Specific reserve + General reserve for substandard loans) (cid:3) (Bankrupt and quasi-bankrupt assets + Doubtful assets +

Substandard loans — Portion secured by collateral or guarantees, etc.)

Off-Balancing Problem Assets

March 31,
2006
1

Fiscal 2006

New occurrences

Off-balanced

Bankrupt and quasi-bankrupt assets ................
Doubtful assets .................................................
Total..................................................................

¥164.5
473.4
¥637.9

¥ 56.8
300.8
¥ 357.6

¥(112.4)
(474.1)
¥(586.5)

Bankrupt and quasi-bankrupt assets ................
Doubtful assets .................................................
Total..................................................................

Fiscal 2007

New occurrences

Off-balanced

¥ 71.8
382.9
¥454.7

¥ (62.9)
(281.0)
¥(343.9)

Billions of yen
March 31,
2007
2

¥ 108.9
300.1
¥ 409.0

Increase/
Decrease
2 — 1

¥ (55.6)
(173.3)
¥(228.9)

March 31,
2008
3

¥ 117.8
402.0
¥ 519.8

Increase/
Decrease
3 — 2

8.9
101.9
¥ 110.8

Notes: 1. The off-balancing (also known as “final disposal”) of problem assets refers to the removal of such assets from the bank’s balance sheet by way of

sale, direct write-off or other means.

2. The figures shown in the above table under “new occurrences” and “off-balanced” are simple additions of the figures for the first and second halves
of the two periods reviewed. Amounts of ¥78.8 billion for fiscal 2006 and ¥84.7 billion in fiscal 2007, recognized as “new occurrences” in the first
halves of the terms, were included in the amounts off-balanced in the respective second halves.

186

SMFG 2008

Securities (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Balance of Securities
Year-End Balance

March 31

Domestic operations:

Millions of yen

2008

2007

Japanese government bonds ........................................................................
Japanese local government bonds ................................................................
Japanese corporate bonds ............................................................................
Japanese stocks ............................................................................................
Others ............................................................................................................
Foreign bonds...........................................................................................
Foreign stocks ..........................................................................................
Subtotal..........................................................................................................

International operations:

Japanese government bonds ........................................................................
Japanese local government bonds ................................................................
Japanese corporate bonds ............................................................................
Japanese stocks ............................................................................................
Others ............................................................................................................
Foreign bonds...........................................................................................
Foreign stocks ..........................................................................................
Subtotal..........................................................................................................
Total ....................................................................................................................

¥ 8,799,249
331,178
3,506,181
3,668,150
425,814
/
/
¥ 16,730,573

—
—
—
—
6,027,667
4,812,110
1,215,556
¥ 6,027,667
¥ 22,758,241

¥ 6,927,353
520,708
3,831,945
4,830,277
932,657
/
/
¥17,042,942

—
—
—
—
3,017,931
1,699,133
1,318,798
¥ 3,017,931
¥20,060,873

Average Balance

Year ended March 31

Domestic operations:

Millions of yen

2008

2007

Japanese government bonds ........................................................................
Japanese local government bonds ................................................................
Japanese corporate bonds ............................................................................
Japanese stocks ............................................................................................
Others ............................................................................................................
Foreign bonds...........................................................................................
Foreign stocks ..........................................................................................
Subtotal..........................................................................................................

International operations:

Japanese government bonds ........................................................................
Japanese local government bonds ................................................................
Japanese corporate bonds ............................................................................
Japanese stocks ............................................................................................
Others ............................................................................................................
Foreign bonds...........................................................................................
Foreign stocks ..........................................................................................
Subtotal..........................................................................................................
Total ....................................................................................................................

¥ 7,341,261
470,333
3,632,377
2,904,058
775,090
/
/
¥ 15,123,121

—
—
—
—
3,528,429
2,255,870
1,272,559
¥ 3,528,429
¥ 18,651,550

¥ 8,566,945
550,770
3,804,985
2,920,211
920,559
/
/
¥16,763,472

—
—
—
—
4,095,307
2,821,607
1,273,700
¥ 4,095,307
¥20,858,779

Note: The average balance of foreign-currency-denominated transactions by domestic branches in international operations is calculated by the monthly

current method.

SMFG 2008 187

Balance of Securities Held, Classified by Maturity

March 31

One year or less

One — three years

Three — five years

Five — seven years

Seven — 10 years

More than 10 years

No designated term

Japanese government bonds ........................................................................
Japanese local government bonds ...............................................................
Japanese corporate bonds ...........................................................................
Japanese stocks ...........................................................................................
Others ...........................................................................................................
Foreign bonds...........................................................................................
Foreign stocks ..........................................................................................

Total

Japanese government bonds ........................................................................
Japanese local government bonds ...............................................................
Japanese corporate bonds ...........................................................................
Japanese stocks ...........................................................................................
Others ...........................................................................................................
Foreign bonds...........................................................................................
Foreign stocks ..........................................................................................

Millions of yen

2008

2007

¥ 1,637,379
64,060
349,571
471,036
456,965
—

1,448,219
43,929
1,104,278
2,227,909
2,163,254
141

3,639,495
70,114
1,028,132
1,523,728
1,478,032
—

292,217
102,245
576,636
174,050
122,496
1,595

146,871
50,430
401,459
413,635
384,846
—

1,635,066
398
46,102
386,561
206,517
180,043

—
—
—
3,668,150
1,256,560
—
1,033,775

¥ 8,799,249
331,178
3,506,181
3,668,150
6,453,481
4,812,110
1,215,556

¥ 2,784,983
83,763
555,185
413,472
349,371
—

456,226
72,335
1,175,630
265,958
153,931
15,835

897,565
60,149
931,372
138,547
84,577
—

583,079
212,590
635,881
173,241
136,925
—

301,441
91,447
437,479
532,189
410,492
7,976

1,904,058
421
96,396
783,940
563,835
220,105

—
—
—
4,830,277
1,643,238
—
1,074,880

¥ 6,927,353
520,708
3,831,945
4,830,277
3,950,589
1,699,133
1,318,798

188

SMFG 2008

Ratios (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Income Ratio

Year ended March 31

Ordinary profit to total assets ..............................................................................
Ordinary profit to stockholders’ equity.................................................................
Net income to total assets...................................................................................
Net income to stockholders’ equity .....................................................................

Percentage

2008

0.56%

14.28
0.22
5.64

2007

0.62%

18.57
0.34
10.13

Notes: 1. Ordinary profit (net income) to total assets = Ordinary profit (net income) / Average balance of total assets excluding customers’ liabilities for

acceptances and guarantees x 100

2. Ordinary profit (net income) to stockholders’ equity = (Ordinary profit (net income) - Preferred dividends) / {(Stockholders’ equity at beginning of the
fiscal year - Number of shares of preferred stock outstanding at beginning of the fiscal year x Issue price) + (Net assets at end of the fiscal year -
Number of shares of preferred stock outstanding at end of the fiscal year x Issue price)} divided by 2 x 100

Yield/Interest Rate

Year ended March 31

Domestic operations

Interest-earning assets (A) ............................................................................
Interest-bearing liabilities (B) .........................................................................
(A) – (B) ..........................................................................................................

International operations

Total

Loan-Deposit Ratio

March 31

Domestic operations

Percentage

2008

1.78%
1.25
0.53

4.30%
4.43
(0.13)

2.34%
1.91
0.43

2007

1.56%
0.98
0.58

4.61%
4.90
(0.29)

2.12%
1.66
0.46

Millions of yen

2008

2007

Loans and bills discounted (A).......................................................................
Deposits (B) ..................................................................................................
Loan-deposit ratio (%)

(A) / (B) ....................................................................................................
Ratio by average balance for the fiscal year.............................................

¥ 47,935,924
60,751,641

¥ 47,262,094
59,933,911

78.90%
77.99

78.85%
78.59

International operations

¥ 9,021,889
8,631,193

¥ 6,494,346
8,875,426

104.52%
81.61

73.17%
70.82

Total

¥ 56,957,813
69,382,834

¥ 53,756,440
68,809,338

82.09%
78.47

78.12%
77.58

Note: Deposits include negotiable certificates of deposit.

SMFG 2008 189

Securities-Deposit Ratio

March 31

Domestic operations

Millions of yen

2008

2007

Securities (A) ................................................................................................
Deposits (B) ..................................................................................................
Securities-deposit ratio (%)

¥ 16,730,573
60,751,641

¥ 17,042,942
59,933,911

27.53%
25.26

28.43%
27.92

International operations

¥ 6,027,667
8,631,193

¥ 3,017,931
8,875,426

69.83%
38.02

34.00%
45.52

Total

¥ 22,758,241
69,382,834

¥ 20,060,873
68,809,338

32.80%
26.98

29.15%
30.21

Note: Deposits include negotiable certificates of deposit.

190

SMFG 2008

Capital (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Changes in Number of Shares Issued and Capital Stock

Number of shares
issued

Capital stock

Capital reserve

Changes

Balances

Changes

Balances

Changes

Balances

Millions of yen

April 1, 2004*1 ...........................................
September 21, 2004*2...............................
March 30, 2005*3 ......................................
April 1, 2004 — March 31, 2005*4 ............
August 9, 2005*5 .......................................
May 17, 2006*6 .........................................
September 6, 2006*7.................................
September 29, 2006*8 ..............................
October 11, 2006*9 ...................................
October 31, 2006*10 ..................................

—
2
70,001
264,140
—
214,194
173,770
601,757
153,181
(830,000)

55,778,805
55,778,807
55,848,808
56,112,948
56,112,948
56,327,142
56,500,912
57,102,669
57,255,850
56,425,850

—
—
105,001
—
—
—
—
—
—
—

¥559,985
559,985
664,986
664,986
664,986
664,986
664,986
664,986
664,986
664,986

¥ (220,966)
246,205
105,001
—
(344,900)
—
—
—
—
—

¥ 658,726
904,932
1,009,933
1,009,933
665,033
665,033
665,033
665,033
665,033
665,033

Remarks:
*1 Reduction in capital reserve due to a corporate split resulting from the spin-off of certain subsidiaries
*2 Share exchange due to a restructuring of Group companies
*3 Allotment to third parties:

Preferred stock (1st series Type 6): 70,001 shares
Issue price: ¥3,000 thousand

Capitalization: ¥1,500 thousand

*4 Conversion of 32,000 shares of preferred stock (Type 1) and 105,000 shares of preferred stock (Type 3) to 401,140 shares of common stock
*5 Capital reserve was transferred to other capital surplus pursuant to Article 289-2 of the Commercial Code and Article 18-2 of the Banking Law
*6 Conversion of 35,000 shares of preferred stock (Type 1) and 33,000 shares of preferred stock (Type 2) to 214,194 shares of common stock
*7 Conversion of 67,000 shares of preferred stock (Type 2) to 173,770 shares of common stock
*8 Conversion of 500,000 shares of preferred stock (Type 3) to 601,757 shares of common stock
*9 Conversion of 195,000 shares of preferred stock (Type 3) to 153,181 shares of common stock
*10 Cancellation of 35,000 shares of preferred stock (Type 1), 100,000 shares of preferred stock (Type 2) and 695,000 shares of preferred stock (Type 3)

Number of Shares Issued

March 31, 2008

Number of shares issued

56,355,849
70,001
56,425,850

Note: The shares above are not listed on any stock exchange.

Principal Shareholders
a. Common Stock

March 31, 2008

Number of
shares

Percentage of
shares outstanding

Sumitomo Mitsui Financial Group, Inc. ..................................................................................................

56,355,849

100.00%

b. Preferred Stock (1st series Type 6)

March 31, 2008

Number of
shares

Percentage of
shares outstanding

Sumitomo Mitsui Financial Group, Inc. ..................................................................................................

70,001

100.00%

SMFG 2008 191

Others (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Employees

March 31

Number of employees.........................................................................................
Average age (years–months)..............................................................................
Average length of employment (years–months) ................................................
Average annual salary (thousands of yen) .........................................................

2008

17,886
35–11
13–2
¥8,290

2007

16,407
36–4
13–8
¥7,712

Notes: 1. Temporary and part-time staff are excluded from the above calculations but includes overseas local staff. Executive officers who do not concurrently

serve as Directors are excluded from “Number of employees.”

2. “Average annual salary” includes bonus, overtime pay and other fringe benefits.
3. Overseas local staff are excluded from the above calculations other than “Number of employees.”

Number of Offices

March 31

Domestic network:

Main offices and branches .............................................................................
Subbranches..................................................................................................
Agency ...........................................................................................................

Overseas network:

Branches........................................................................................................
Subbranches..................................................................................................
Representative offices ...................................................................................
Total ....................................................................................................................

2008

473
157
1

19
6
15
671

2007

463
156
1

18
5
13
656

Note: “Main offices and branches” includes the International Business Operations Dept. (2008, 2 branches; 2007, 2 branches), specialized deposit account

branches (2008, 38 branches; 2007, 38 branches) and ATM administration branches (2008, 17 branches; 2007, 17 branches).

Number of Automated Service Centers

March 31

Automated service centers .................................................................................

2008

28,120

2007

25,283

Domestic Exchange Transactions

Year ended March 31

Exchange for remittance:

Destined for various parts of the country:

Millions of yen

2008

2007

405,059
¥ 871,073,089

Received from various parts of the country:

301,655
¥ 881,410,435

Collection:

Destined for various parts of the country:

3,444
9,101,611

Received from various parts of the country:

Number of accounts (thousands)..............................................................
Amount .....................................................................................................
Total ....................................................................................................................

1,214
¥
2,801,793
¥1,764,386,929

387,493
¥ 713,802,911

295,072
¥ 842,628,980

4,201
10,897,627

1,218
¥
3,545,842
¥1,570,875,362

192

SMFG 2008

Foreign Exchange Transactions

Year ended March 31

Outward exchanges:

Millions of U.S. dollars

2008

2007

Foreign bills sold ............................................................................................
Foreign bills bought .......................................................................................

Incoming exchanges:

Foreign bills payable ......................................................................................
Foreign bills receivable ..................................................................................
Total ....................................................................................................................

$1,143,759
597,763

$ 685,135
30,156
$2,456,815

Note: The figures above include foreign exchange transactions by overseas branches.

Breakdown of Collateral for Customers’ Liabilities for Acceptances and Guarantees

Millions of yen

March 31

2008

10,334
25,040
4,373
62,754
13,943
¥ 116,446
535,278
4,013,337
¥4,665,062

$ 913,008
422,390

$ 670,892
28,076
$2,034,368

2007

17,427
22,217
4,451
58,403
28,780
¥ 131,280
454,673
3,591,862
¥4,177,816

SMFG 2008 193

Trust Assets and Liabilities (Nonconsolidated)

Sumitomo Mitsui Banking Corporation

Statement of Trust Assets and Liabilities

March 31

Assets:

Loans and bills discounted ............................................................................
Loans on deeds ........................................................................................
Securities .......................................................................................................
Japanese government bonds ...................................................................
Corporate bonds .......................................................................................
Foreign securities .....................................................................................
Other securities.........................................................................................
Securities held in custody accounts...............................................................
Monetary claims.............................................................................................
Monetary claims for housing loans ...........................................................
Other monetary claims..............................................................................
Premises and equipment ...............................................................................
Equipment.................................................................................................
Other claims...................................................................................................
Call loans .......................................................................................................
Due from banking account ............................................................................
Cash and due from banks .............................................................................
Deposits with banks..................................................................................
Others ............................................................................................................
Others .......................................................................................................
Total assets ...................................................................................................

Liabilities:

Designated money trusts ...............................................................................
Specified money trusts ..................................................................................
Pecuniary trusts other than money trusts ......................................................
Security trusts ................................................................................................
Monetary claims trusts ...................................................................................
Composite trusts ............................................................................................
Other trusts ....................................................................................................
Total liabilities ................................................................................................

Notes: 1. Amounts less than one million yen have been omitted.

2. SMBC has no co-operative trusts under other trust bank’s administration as of year-end.
3. SMBC does not deal with any trusts with principal indemnification.

Year-End Balance of Money Trusts and Others

March 31

Money trusts .......................................................................................................
Pension trusts .....................................................................................................
Asset formation benefit trusts .............................................................................
Loan trusts ..........................................................................................................
Total ....................................................................................................................

Year-End Balance of Trusts with Principal Indemnification

There are no corresponding items.

Risk-Monitored Loans Related with Trusts with Principal Indemnification

There are no corresponding items.

Balance of Principal Amounts of Money Trusts and Loan Trusts, Classified by Maturity

Millions of yen

March 31

Money trusts:

Less than one year ........................................................................................
One — two years ...........................................................................................
Two — five years ...........................................................................................
Five years and more ......................................................................................
No designated term .......................................................................................
Total ...............................................................................................................

Loan trusts:

2008

6,457
79,747
50,334
213,028
—
¥ 349,568

—
—
—
—
—
—

194

SMFG 2008

Millions of yen

2008

2007

¥ 223,740
223,740
273,504
202,845
12,000
58,358
300
3,451
571,072
84,419
486,653
25
25
1,318
263
80,796
20,000
20,000
1,540
1,540
¥1,175,711

¥ 292,193
61,864
223,130
3,462
501,920
91,600
1,540
¥1,175,711

2008

¥ 354,058
—
—
—
¥ 354,058

Millions of yen

5,350
5,350
267,110
168,798
12,000
86,312
—
3,000
703,199
123,148
580,051
25
25
1,245
—
65,062
129,401
129,401
—
—
¥1,174,396

¥ 358,058
91,741
—
3,000
598,236
123,359
—
¥1,174,396

2007

¥449,800
—
—
—
¥449,800

2007

¥ 71,658
15,871
111,503
244,253
—
¥443,287

—
—
—
—
—
—

Year-End Balance of Money Trusts and Others

March 31

Money trusts:

Pension trusts:

Asset formation benefit trusts:

Loan trusts:

Loans and bills discounted ............................................................................
Securities .......................................................................................................
Subtotal..........................................................................................................
Total of loans and bills discounted......................................................................
Total of securities................................................................................................
Total ....................................................................................................................

Year-End Balance of Loans and Bills Discounted

March 31

Loans on deeds ..................................................................................................
Loans on notes ...................................................................................................
Bills discounted ...................................................................................................
Total ....................................................................................................................

Year-End Balance of Loans and Bills Discounted, Classified by Maturity

March 31

Loans and bills discounted

One year or less ............................................................................................
One — three years ........................................................................................
Three — five years ........................................................................................
Five — seven years .......................................................................................
More than seven years ..................................................................................
Total ...............................................................................................................

Balance of Loans and Bills Discounted, Classified by Collateral

March 31

Securities ............................................................................................................
Commercial claims..............................................................................................
Real estate..........................................................................................................
Factory ................................................................................................................
Fund....................................................................................................................
Ships and vessels ...............................................................................................
Others .................................................................................................................
Subtotal...............................................................................................................
Guaranteed .........................................................................................................
Unsecured...........................................................................................................
Total ....................................................................................................................

Millions of yen

2008

3,740
270,476
¥ 274,216

—
—
—

—
—
—
¥
¥
3,740
¥ 270,476
¥ 274,216

2008

¥ 3,740
—
—
¥ 3,740

2008

2,540
—
—
220,000
1,200
¥ 223,740

Millions of yen

2008

—
—
—
—
—
—
—
—
—
223,740
¥ 223,740

¥
¥

2007

5,350
267,110
¥272,460

—
—
—

—
—
—
¥
¥
5,350
¥267,110
¥272,460

2007

¥5,350
—
—
¥5,350

2007

¥1,350
1,800
1,000
—
1,200
¥5,350

2007

¥ —
—
—
—
—
—
—
¥ —
¥ —
5,350
¥5,350

SMFG 2008 195

Balance of Loans and Bills Discounted, Classified by Purpose

March 31

Millions of yen

2008

2007

1,000
222,740
¥ 223,740

0.45%

99.55
100.00%

¥1,000
4,350
¥5,350

18.69%
81.31
100.00%

Breakdown of Loan Portfolio, Classified by Industry

March 31

Millions of yen

2008

2007

Manufacturing .....................................................................................................
Agriculture, forestry, fisheries and mining...........................................................
Construction........................................................................................................
Transportation, communications and public enterprises.....................................
Wholesale and retail ...........................................................................................
Finance and insurance........................................................................................
Real estate..........................................................................................................
Services ..............................................................................................................
Municipalities ......................................................................................................
Others .................................................................................................................
Total ....................................................................................................................

1,000
100,000
—
1,040
—
1,200
120,000
500
—
—
¥ 223,740

0.45%

44.70
—
0.46
—
0.54
53.63
0.22
—
—

100.00%

¥1,000
—
—
1,650
1,000
1,200
—
500
—
—
¥5,350

18.69%
—
—
30.84
18.69
22.43
—
9.35
—
—

100.00%

Loans to Individuals/Small and Medium-Sized Corporations
Balance of Loans

March 31

Total to individuals, and small and medium-sized enterprises (A)......................
Total loans (B).....................................................................................................
(A) / (B) ...............................................................................................................

Number of Loans Lent

March 31

Total to individuals, and small and medium-sized enterprises (C)......................
Total loans (D) ....................................................................................................
(C) / (D) ...............................................................................................................

Millions of yen

Number of loans

2008

1,040
223,740

0.46%

2008

2
7

28.57%

2007

¥1,650
5,350
30.84%

2007

3
7

42.85%

Note: Small and medium-sized enterprises are individuals or companies with capital stock of ¥300 million or less, or an operating staff of 300 or fewer

employees. (Exceptions to these capital stock and staff restrictions include wholesalers: ¥100 million, 100 employees; retailers: ¥50 million, 50
employees; and service industry companies: ¥50 million, 100 employees.)

Year-End Balance of Securities Related with Money Trusts and Others

March 31

Millions of yen

2008

2007

Japanese government bonds..............................................................................
Japanese local government bonds .....................................................................
Short-term Japanese corporate bonds ...............................................................
Japanese corporate bonds .................................................................................
Japanese stocks .................................................................................................
Others .................................................................................................................
Total ....................................................................................................................

¥ 199,818
—
—
12,000
—
58,658
¥ 270,476

73.87%
—
—
4.44
—
21.69
100.00%

¥168,798
—
—
12,000
—
86,312
¥267,110

63.20%
—
—
4.49
—
32.31
100.00%

196

SMFG 2008

Capital Ratio Information

Sumitomo Mitsui Banking Corporation and Subsidiaries

■ Capital Structure Information (Consolidated Capital Ratio (International Standards))

March 31

Tier I capital:

Tier II capital:

Deductions:
Total qualifying capital:
Risk-adjusted assets:

Tier I risk-adjusted

capital ratio:

Total risk-adjusted

capital ratio:
Required capital:

Capital stock...........................................................................................
Capital surplus........................................................................................
Retained earnings ..................................................................................
Cash dividends.......................................................................................
Foreign currency translation adjustments ..............................................
Stock acquisition rights...........................................................................
Minority interests ....................................................................................
Goodwill and others................................................................................
Gain on sale on securitization transactions............................................
Total Tier I capital (A) .............................................................................
Unrealized gains on other securities after 55% discount .......................
Land revaluation excess after 55% discount..........................................
General reserve for possible loan losses ...............................................
Excess amount of provision ...................................................................
Subordinated debt ..................................................................................
Total Tier II capital..................................................................................
Tier II capital included as qualifying capital (B) ......................................
(C) ..........................................................................................................
(D) = (A) + (B) - (C) ................................................................................
On-balance sheet items .........................................................................
Off-balance sheet items .........................................................................
Market risk items ....................................................................................
Operational risk ......................................................................................
Total risk-adjusted assets (E).................................................................

Millions of yen

2008

2007

664,986
1,603,512
861,508
(15,383)
(28,468)
43
1,462,222
(2)
(44,045)
4,504,375
338,561
37,220
44,969
89,794
2,523,062
3,033,608
3,033,608
339,552
¥ 7,198,431
¥ 45,445,432
10,194,881
402,197
2,971,224
¥ 59,013,736

664,986
1,603,512
581,619
—

(37,194)
14
1,374,169
(4)
(40,057)
4,147,047
830,321
39,367
28,115
193,977
2,564,195
3,655,976
3,655,976
320,319
¥ 7,482,705
¥ 44,878,966
8,756,301
401,455
3,701,598
¥ 57,738,321

(A) / (E) x 100 .........................................................................................

7.63%

7.18%

12.19%

12.95%

¥ 4,721,098

¥ 4,619,065

SMFG 2008 197

■ Capital Structure Information (Nonconsolidated Capital Ratio (International Standards))

March 31

Tier I capital:

Tier II capital:

Deductions:
Total qualifying capital:
Risk-adjusted assets:

Tier I risk-adjusted

capital ratio:

Total risk-adjusted

capital ratio:
Required capital:

Capital stock...........................................................................................
Capital reserve .......................................................................................
Other capital surplus ..............................................................................
Other retained earnings..........................................................................
Other ......................................................................................................
Cash dividends.......................................................................................
Gain on sale on securitization transactions............................................
Deductions of deferred tax assets..........................................................
Total Tier I capital (A) .............................................................................
Unrealized gains on other securities after 55% discount .......................
Land revaluation excess after 55% discount..........................................
General reserve for possible loan losses ...............................................
Excess amount of provision ...................................................................
Subordinated debt ..................................................................................
Total Tier II capital..................................................................................
Tier II capital included as qualifying capital (B) ......................................
(C) ..........................................................................................................
(D) = (A) + (B) - (C) ................................................................................
On-balance sheet items .........................................................................
Off-balance sheet items .........................................................................
Market risk items ....................................................................................
Operational risk ......................................................................................
Total risk-adjusted assets (E).................................................................

Millions of yen

2008

2007

664,986
665,033
702,514
894,560
953,936
(15,383)
(44,045)
(58,930)
3,762,673
339,932
30,774
—
8,282
2,683,172
3,062,160
3,062,160
272,393
¥ 6,552,440
¥ 40,580,140
8,619,697
257,905
2,241,099
¥ 51,698,842

664,986
665,033
702,514
760,100
933,063
—

(40,057)

—
3,685,641
824,998
32,920
—
32,467
2,710,870
3,601,257
3,601,257
286,295
¥ 7,000,603
¥ 40,755,261
7,871,270
334,631
3,053,199
¥ 52,014,363

(A) / (E) x 100 .........................................................................................

7.27%

7.08%

12.67%

13.45%

¥ 4,135,907

¥ 4,161,149

198

SMFG 2008

Corporate Data

Sumitomo Mitsui Financial Group, Inc.

■ Board of Directors, Corporate Auditors, and Executive Officers (as of June 30, 2008)

BOARD OF DIRECTORS

Masayuki Oku
Chairman of the Board and Representative Director

Teisuke Kitayama
President and Representative Director

Hiroki Nishio
Senior Managing Director and Representative Director
Audit Dept.

Osamu Endo
Director
Consumer Business Planning Dept.

Junsuke Fujii
Director
General Affairs Dept., Human Resources Dept.,
Corporate Risk Management Dept.

Takeshi Kunibe
Director
Public Relations Dept., Corporate Planning Dept.,
Financial Accounting Dept., Strategic Financial Planning Dept.,
Subsidiaries & Affiliates Dept.

Yoshiaki Yamauchi
Director (outside)

Yoichiro Yamakawa
Director (outside)

Yoshinori Yokoyama
Director (outside)

■ SMFG Organization (as of June 30, 2008)

CORPORATE AUDITORS

Masahide Hirasawa
Corporate Auditor

Yoji Yamaguchi
Corporate Auditor

Katsuya Onishi
Corporate Auditor (outside)

Hiroshi Araki
Corporate Auditor (outside)

Ikuo Uno
Corporate Auditor (outside)

EXECUTIVE OFFICERS

Wataru Ohara
Senior Managing Director
Corporate Risk Management Dept.

Hideo Shimada
Senior Managing Director
IT Planning Dept.

Tetsuya Kubo
Managing Director
Investment Banking Planning Dept.

Shareholders’
Meeting

Board of Directors

Auditing Committee

Risk Management Committee

Compensation Committee

Nominating Committee

Group Strategy
Committee

Management
Committee

Corporate Auditors/
Board of Corporate
Auditors

Office of Corporate Auditors

Public Relations Dept.

Corporate Planning Dept.

Investor Relations Dept.

Group CSR Dept.

Financial Accounting Dept.

Strategic Financial Planning Dept.

Subsidiaries & Affiliates Dept.

Consumer Business Planning Dept.

Investment Banking Planning Dept.

IT Planning Dept.

General Affairs Dept.

Human Resources Dept.

Corporate Risk Management Dept.

Audit Dept.

Group Business Management Dept.

SMFG 2008 199

Sumitomo Mitsui Banking Corporation

■ Board of Directors, Corporate Auditors, and Executive Officers (as of June 30, 2008)

BOARD OF DIRECTORS

Chairman of the Board

Teisuke Kitayama

President

Masayuki Oku*

Vice Chairman of the Board

Kenjiro Nakano

Deputy Presidents

Shigenobu Aikyo*
Head of Middle Market Banking Unit

Osamu Endo*
Head of Consumer Banking Unit

Hirosumi Tsusue*
Head of Corporate Banking Unit,
International Business Promotion Dept., Global Advisory Division

Senior Managing Directors

Akira Kitamura*
Corporate Research Dept., Credit Administration Dept.,
Deputy Head of Corporate Banking Unit (Credit Dept.),
Investment Banking Unit (Structured Finance Credit Dept.),
Corporate Advisory Division

Wataru Ohara*
Corporate Risk Management Dept., Credit & Investment Planning Dept.,
Trust Services Dept.

Yoshinori Kawamura*
Head of International Banking Unit

Hideo Shimada*
IT Planning Dept., Operations Planning Dept., Operations Support
Dept., Director of JRI

Directors (outside)

Yoshiaki Yamauchi

Yoichiro Yamakawa

Yoshinori Yokoyama

*Executive Officers

CORPORATE AUDITORS

Nobuo Tsukuni
Corporate Auditor

Hiroki Yaze
Corporate Auditor

Katsuya Onishi
Corporate Auditor (outside)

Hiroshi Araki
Corporate Auditor (outside)

200

SMFG 2008

Ikuo Uno
Corporate Auditor (outside)

Masahide Hirasawa
Corporate Auditor

EXECUTIVE OFFICERS

Managing Directors

Keiichi Ando
Osaka Corporate Banking Division
(Osaka Corporate Banking Dept. I, II, and III)

Satoru Nakanishi
Nagoya Corporate Banking Division (Nagoya Corporate Banking
Dept.), and Head of the Nagoya Middle Market Banking Division

Koki Nomura
Deputy Head of Middle Market Banking Unit (in charge of East Japan)

Junsuke Fujii
Human Resources Dept.,
Human Resources Development Dept., Quality Management Dept.,
General Affairs Dept., Legal Dept., and Administrative Services Dept.

Tetsuya Kubo
Investment Banking Unit

Takeshi Kunibe
Public Relations Dept., Corporate Planning Dept.,
Financial Accounting Dept., Strategic Financial Planning Dept.,
Subsidiaries & Affiliates Dept.

Fumihiko Tanizawa
Internal Audit Dept. and Credit Review Dept.

Koichi Miyata
Head of Treasury Unit, Human Resources Dept. and
Human Resources Development Dept.

Kazumasa Hashimoto
Deputy Head of Middle Market Banking Unit (in charge of West Japan)

Kozo Masaki
Head of China Division, and General Manager, Shanghai Branch

Jun Mizoguchi
Head of Europe Division, and President of Sumitomo Mitsui Banking
Corporation Europe Limited

Tatsuo Yamanaka
Head of Corporate Advisory Division

Kazuya Jono
Deputy Head of Consumer Banking Unit
Head of Private Advisory Dept.

Hideo Hiyama
Deputy Head of International Banking Unit

Naoyuki Kawamoto
General Manager, Corporate Risk Management Dept.

Koichi Minami
Deputy Head of Middle Market Banking Unit (Credit Dept. II)

Yoshihiko Shimizu
General Manager, Planning Dept., Corporate Banking Unit
& Middle Market Banking Unit

Yuichiro Takada
Tokyo Corporate Banking Division
(Corporate Banking Dept.s I, II, and III)

Koichi Danno
Head of Asia Pacific Division

Hiroshi Minoura
Head of Americas Division

Mitsunori Watanabe
Tokyo Corporate Banking Division
(Corporate Banking Dept.s IV, V, and VI)

Directors

Tsuyoshi Isono
Chairman of SMBC Capital Markets, Inc.

Yujiro Ito
General Manager, General Affairs Dept.

Seiichiro Takahashi
General Manager, Planning Dept., Treasury Unit

Hidetoshi Furukawa
Deputy Head of Corporate Banking Unit,
International Banking Unit,
International Banking Unit, Global Advisory Division

Ikuhiko Morikawa
General Manager, Planning Dept., Consumer Banking Unit

Takayuki Hayakawa
Head of Tokyo Higashi Middle Market Banking Division

Katsunori Okubo
General Manager, Hong Kong Branch

Kenichi Gogami
General Manager, Quality Management Dept.

Takashi Saito
Assistant Head of Corporate Advisory Division

Ryusuke Itakura
Deputy Head of Consumer Banking Unit (in charge of West Japan)

Shuichi Kageyama
Head of Kyoto Hokuriku Middle Market Banking Division,
and General Manager

Kazuhiro Shibata
Deputy Head of Corporate Banking Unit (Credit Dept. I)

Kuniaki Fujiwara
General Manager, Kobe Block Consumer Business Office

Hiroyuki Iwami
General Manager, Tokyo Corporate Banking Dept. III

Yuichiro Ueda
General Manager, Credit Dept., Corporate Banking Unit

Hiroyasu Okano
General Manager, Private Banking Business Office

Shusuke Kurose
IT Planning Dept.

Tatsuya Nishimoto
General Manager, Shibuya Corporate Business Office,
General Manager, Yokohama Corporate Business Office

Masahiro Fuchizaki
Operations Planning Dept. and
Operations Support Dept.

Nobuaki Kurumatani
General Manager, Corporate Planning Dept.

Toshimi Tagata
General Manager, Real Estate Finance Dept.

Masaki Tachibana
General Manager, Human Resources Dept.

Kohei Hirota
Head of Osaka Minami Middle Market Banking Division II

Yoshimi Miura
General Manager, Nagoya Corporate Banking Dept.

William M. Ginn
General Manager, Specialized Industries Dept., and The Americas
Division and Chairman of SMBC Leasing and Finance, Inc.

Nicholas Andrew Pitts-Tucker
Co-General Manager, Structured Finance Dept., Europe Division,
and International Finance Dept., Europe Division, and Executive
Director, General Manager, Co-Head of International & Structured
Finance Department
Sumitomo Mitsui Banking Corporation Europe Ltd.

Hikota Koshika
Head of Kobe Middle Market Banking Division

Ryosuke Harada
Head of Tokyo Toshin Middle Market Banking Division

Haruhide Maeda
General Manager, Himeji Corporate Business Office

Nobuo Iida
Head of Osaka Kita Middle Market Banking Division

Takahiko Kato
General Manager, Singapore Branch

Ichiro Onishi
General Manager, Tokyo Chu-o Block Consumer Business Office

Kazunori Okuyama
Head of Shinjuku Middle Market Banking Division, and Head of
Saitama Ikebukuro Middle Market Banking Division

Fumitoshi Onodera
General Manager, Tokyo Corporate Banking Dept. IV

Hiroshi Kobayashi
General Manager, Planning Dept., Investment Banking Unit

Toru Nagamoto
General Manager, Compliance Audit Group

Atsuhiko Inoue
General Manager, Osaka Corporate Banking Dept. I

Shogo Sekimoto
General Manager, Tokyo Corporate Banking Dept. I

Toshiyuki Teramoto
General Manager, Corporate Credit Dept. I, Middle Market Banking Unit

Manabu Narita
General Manager, Shinjuku Nishiguchi Middle Market Banking
Division I

Chris Chan Chi Keung
General Manager, Greater China Corporate Banking Dept.

SMFG 2008 201

I
G

Internal Audit Unit

Internal Audit Dept.

Internal Audit Planning Dept.

Credit Review Dept.

Corporate Staff Unit

Public Relations Dept.
Corporate Planning Dept.

Financial Research Dept.
CSR Dept.

Financial Accounting Dept.

Equity Portfolio Management Dept.

Strategic Financial Planning Dept.
Subsidiaries & Affiliates Dept.
Corporate Risk Management Dept.

Risk Management Systems Dept.

Credit & Investment Planning Dept.

Credit Portfolio Management Dept.

IT Planning Dept.
Human Resources Dept.

Training Institute
Counseling Dept.
Diversity and Inclusion Dept.
Human Resources Development Dept.
Quality Management Dept.

Customer Relations Dept.

Compliance Unit

General Affairs Dept.

Operational Risk Management Dept.
Antimonopoly Law Monitoring Dept.
Financial Products Compliance Dept.
Financial Crime Prevention Dept.
International Compliance Dept.

Legal Dept.

Corporate Services Unit

Administrative Services Dept.

Secretariat

Operations Planning Dept.
Operations Support Dept.
Corporate Research Dept.
Credit Administration Dept.
Trust Services Dept.

Trust Business Operations Dept.

Consumer
Banking Unit

Middle Market
Banking Unit

Corporate
Banking Unit

International
Banking Unit

Treasury Unit

Investment
Banking Unit

■ SMBC Organization (as of June 30, 2008)

Shareholders’
Meeting

Board of
Directors

Management
Committee

Corporate Auditors/
Board of Corporate Auditors

Office of Corporate Auditors

202

SMFG 2008

International Business Promotion Dept.
Global Advisory Dept.

Planning Dept., Corporate Banking Unit & Middle Market Banking Unit

Middle Market Solution Dept.

Private Advisory Dept.
Private Banking Dept.

Stock Execution Dept.

Corporate Employees Business Dept.

Defined Contribution Dept.

Succession Business Dept.

Planning Dept., Consumer Banking Unit

Block Consumer Business Office

Middle Market Banking Division

Tokyo Corporate Banking Division
Osaka Corporate Banking Division
Nagoya Corporate Banking Division

Americas Division
Europe Division
China Division
Asia Pacific Division

Marketing Dept.
Next W-ing Project Dept.

Financial Consulting Dept.

Financial Consulting R&D Dept.

Consumer Loan Dept.
Mass Retail Dept.
Credit Dept., Consumer Banking Unit

Public & Financial Institutions Banking Dept.
Small and Medium Enterprises Marketing Dept.
Credit Dept. I, Middle Market Banking Unit

Credit Monitoring Dept.

Credit Dept. II, Middle Market Banking Unit

Credit Monitoring Dept.

Credit Dept., Corporate Banking Unit

Planning Dept., International Banking Unit

IT & Business Administration Planning Dept.
Asia Pacific Training Dept.
Planning Dept., Americas Division
Credit Dept., Americas Division
Compliance Dept., Americas Division
Planning Dept., Europe Division
Credit Dept., Europe Division
Planning Dept., China Division
Planning Dept., Asia Pacific Division
Credit Dept., International Banking Unit

Environment Analysis Dept.

Planning Dept., Treasury Unit
Treasury Dept.
International Treasury Dept.
Trading Dept.
Treasury Marketing Dept.

Planning Dept., Investment Banking Unit

R&D Dept.
Syndication Dept.
Structured Finance Dept.

Shipping Finance Dept.
Environmental Products Dept.

Real Estate Finance Dept.
REIT Investment Dept.
M&A Advisory Services Dept.
Investment Development Dept.
Merchant Banking Dept.
Financial Engineering Dept.
Securities Marketing Dept.

Securities Direct Sales Dept.
Structured Finance Credit Dept.

Settlement Finance Unit
Electronic Commerce Banking Dept.

Global Transaction Banking Dept.

Asset Finance Dept.
Global Securities Business Dept.

Branch
Consumer Loan Promotion Office
Apartment House Loan Promotion Office
Loan Support Office
Private Banking Dept.
Direct Banking Dept.
Consumer Finance Promotion Office

Corporate Business Office
Business Promotion Office
Financial Development Office
Public Institutions Business Office
Business Support Office

Corporate Advisory Division

Corporate Banking Dept.

Global Institutional Banking Dept.
Global Client Business Dept.
Global Corporate Investment Dept.
Global Trade Finance Dept.
Branches/Representative
Offices in North East Asia
Departments of Americas Division
Departments of Europe Division
Branches/Representative Offices
in China Division
Branches/Representative
Office in Asia Pacific Division

Branch Service Office
Head/Main Service Office
Public Institutions Operations Office

SMFG 2008 203

Principal Subsidiaries and Affiliates (as of March 31, 2008)
All companies shown hereunder are consolidated subsidiaries or affiliates of Sumitomo Mitsui Financial Group, Inc.
Those printed in green ink are consolidated subsidiaries or affiliates of Sumitomo Mitsui Banking Corporation.

■ Principal Domestic Subsidiaries*2

Company Name

Issued Capital
(Millions of Yen)

Percentage of
SMFG’s Voting
Rights (%)

Percentage of
SMBC’s Voting
Rights (%)

Established

Main Business

Sumitomo Mitsui Banking Corporation

664,986

100

Sumitomo Mitsui Card Company, Limited

Sumitomo Mitsui Finance and Leasing Co., Ltd.

The Japan Research Institute, Limited

JRI Solutions, Limited

SMBC Friend Securities Co., Ltd.

SAKURA CARD CO., Ltd.

QUOQ Inc.

The Japan Net Bank, Limited

SMBC Loan Business Planning Co., Ltd.

SMBC Loan Adviser Co., Ltd.

SMBC Guarantee Co., Ltd.

SMBC Finance Business Planning Co., Ltd.

SMBC Finance Service Co., Ltd.

SMBC Business Support Co., Ltd.

Financial Link Company, Limited

SMBC Consulting Co., Ltd.

SMBC Support & Solution Co., Ltd.

SMBC Servicer Co., Ltd.

Sakura Information Systems Co., Ltd.*2

SAKURA KCS Corporation

THE MINATO BANK, LTD.

Kansai Urban Banking Corporation

SMBC Staff Service Co., Ltd.

SMBC Learning Support Co., Ltd.

SMBC PERSONNEL SUPPORT CO., LTD.

SMBC Center Service Co., Ltd.

SMBC Delivery Service Co., Ltd.

SMBC Green Service Co., Ltd.

SMBC International Business Co., Ltd.

SMBC International Operations Co., Ltd.

SMBC Loan Business Service Co., Ltd.

SMBC Market Service Co., Ltd.

SMBC Loan Administration and Operations Service Co., Ltd.

SMBC Property Research Service Co., Ltd.

34,000

15,000

65.99

55.00

10,000

100

5,000

(100)

27,270

100

—

June 6, 1996

Commercial banking

Dec. 26, 1967

Credit card services

Feb. 4, 1963

Leasing

Nov. 1, 2002

System engineering, data processing,
management consulting, and economic research

July 3, 2006

System engineering, data processing

Mar. 2, 1948

Securities

7,438

4,750

37,250

100,010

187,720

71,705

160

1,100

1,000

600

2,054

27,484

37,040

100

(95.74)

85.14

(10.59)

Feb. 23, 1983

Credit card services

(56.53)

11.0

(32.82)

April 5, 1978

Credit card services

(59.70)

59.70

Sept. 19, 2000

Commercial banking

100

April 1, 2004

Management support services

(100)

April 1, 1998

Consulting and agency services for
consumer loans

(100)

July 14, 1976

Credit guarantee

100

April 1, 2004

Management support services

(100)

Dec. 5, 1972

Loans, collecting agent and factoring

(100)

July 1, 2004

Clerical work outsourcer

(100)

Sept. 29, 2000

(100)

(50)

May 1, 1981

Data processing service and e-trading
consulting
Management consulting and seminar
organizer

(100)

(66)

100

April 1, 1996

Help desk and system support

Mar. 11, 1999

Servicer

Nov. 29, 1972

System engineering and data processing

(50.22)

27.53

(5.00)

Mar. 29, 1969

System engineering and data processing

(46.34)

45.10

(1.23)

Sept. 6, 1949

Commercial banking

(58.00)

42.30

(5.94)

July 1, 1922

Commercial banking

(100)

100

July 15, 1982

Temporary manpower service

May 27, 1998

Seminar organizer

April 15, 2002

Banking clerical work

Oct. 16, 1995

Banking clerical work

Jan. 31, 1996

Banking clerical work

Mar. 15, 1990

Banking clerical work

Sept. 28, 1983

Banking clerical work

Dec. 21, 1994

Banking clerical work

Sept. 24, 1976

Banking clerical work

Feb. 3, 2003

Banking clerical work

Feb. 3, 2003

Banking clerical work

Feb. 1, 1984

Banking clerical work

*1 On April 1, 2008, both Sumitomo Mitsui Banking Corporation and Sumitomo Financial Group included PRIMUS Financial Services, Inc., within the scope of
consolidation.
*2 On April 1, 2008, Sakura Information Services, Inc., became an affiliate of both Sumitomo Mitsui Banking Corporation and Sumitomo Financial Group.

204

SMFG 2008

■ Principal Overseas Subsidiaries

Company Name

Country

Issued Capital

Sumitomo Mitsui Banking
Corporation Europe Limited

Manufacturers Bank

Sumitomo Mitsui Banking
Corporation of Canada
Banco Sumitomo Mitsui
Brasileiro S.A.
PT Bank Sumitomo Mitsui
Indonesia

U.K.

U.S.A.

Canada

Brazil

US$1,700 million

US$80.786 million

C$169 million

R$409.357 million

Indonesia

Rp1,502.4 billion

SMBC Leasing and Finance, Inc.

U.S.A.

SMBC Capital Markets, Inc.

SMBC Securities, Inc.

SMBC Financial Services, Inc.

U.S.A.

US$1,620

US$100

US$3 million

SMBC Cayman LC Limited *

Cayman Islands

US$1,375 million

Sumitomo Finance (Asia) Limited

Cayman Islands

US$35 million

SBTC, Inc.

SB Treasury Company L.L.C.

SB Equity Securities (Cayman),
Limited

U.S.A.

US$50 million

US$470 million

Cayman Islands

¥25,000 million

SFVI Limited

British Virgin Islands

US$300

Sakura Finance (Cayman) Limited

Cayman Islands

US$100,000

Sakura Preferred Capital
(Cayman) Limited

Cayman Islands

¥10 million

SMBC International Finance N.V.

Netherlands Antilles

US$200,000

SMBC Leasing Investment LLC

U.S.A.

US$344,620 million

SMBC Capital Partners LLC

U.S.A.

US$10,000

SMBC MVI SPC

Cayman Islands

US$45 million

SMBC DIP Limited

Cayman Islands

US$1 million

SMBC Capital Markets Limited

SMBC Derivative Products
Limited
Sumitomo Finance
International plc
Sumitomo Mitsui Finance Dublin
Limited

U.K.

US$547 million

US$300 million

£90 million

Ireland

US$18 million

Sakura Finance Asia Limited

Hong Kong

US$65.5 million

Percentage of
SMFG’s Voting
Rights (%)

Percentage of
SMBC’s Voting
Rights (%)

Established

Main Business

(100)

100

Mar. 5, 2003

Commercial banking

June 26, 1962

Commercial banking

April 1, 2001

Commercial banking

Oct. 6, 1958

Commercial banking

(99)

Aug. 22, 1989

Commercial banking

(100)

89.7

(7.7)

Nov. 9, 1990

Leasing, investments

(100)

100

(10)

Dec. 4, 1986

Derivatives and investments

(10)

Aug. 8, 1990

Securities, investments

Aug. 8, 1990

Feb. 7, 2003

Investments,
investment advisor

Credit guarantee,
bond investment

Sept. 26, 1973

Investments

Jan. 26, 1998

Investments

(100)

Jan. 26, 1998

Loans

(100)

100

Dec. 15, 1998

Finance

July 30, 1997

Investments

Feb. 11, 1991

Finance

Nov. 12, 1998

Finance

June 25, 1990

Finance

(100)

April 7, 2003

Investments in leasing

(100)

100

Dec. 18, 2003

Holding and trading securities

Sept. 9, 2004

Mar. 16, 2005

Loans, buying/
selling of monetary claims

Mar. 13, 1990

Derivatives and investments

(100)

April 18, 1995

Derivatives and investments

(100)

100

July 1, 1991

Investments

Sept. 19, 1989

Finance

Oct. 17, 1977

Investments

June 29, 1984

Finance

Nov. 28, 2006

Finance

Sumitomo Mitsui Finance
Australia Limited
SMFG Preferred Capital USD 1
Limited

Australia

A$156.5 million

Cayman Islands

US$1,650 million

100

* SMBC Cayman LC Limited, like other subsidiaries of SMBC, is a separate corporate entity with its own separate creditors and the claims of such creditors are

prior to the claims of SMBC, as the direct or indirect holder of the equity in such subsidiary.

Note: Figures in parentheses ( ) in the voting rights column indicate voting rights held indirectly via subsidiaries and/or affiliates.

SMFG 2008 205

Company Name

Country

Issued Capital

Percentage of
SMFG’s Voting
Rights (%)

Percentage of
SMBC’s Voting
Rights (%)

Established

Main Business

SMFG Preferred Capital GBP 1
Limited
SMFG Preferred Capital JPY 1
Limited

SMBC Preferred Capital USD 1
Limited
SMBC Preferred Capital GBP 1
Limited

SMBC Preferred Capital JPY 1
Limited

Cayman Islands

£500 million

Cayman Islands

¥135,000 million

Cayman Islands

US$1,664 million

Cayman Islands

£505 million

Cayman Islands

¥137,000 million

100

(100)

100

Nov. 28, 2006

Finance

Jan. 11, 2008

Finance

Nov. 28, 2006

Finance

Nov. 28, 2006

Finance

Jan. 11, 2008

Finance

Daiwa SB Investments Ltd.

2,000

43.96

■ Principal Affiliates

Company Name

Daiwa Securities SMBC Co. Ltd.

NIF SMBC Ventures Co., Ltd.

Daiwa Securities SMBC Principal
Investments Co. Ltd.

Japan Pension Navigator Co., Ltd.*

Sumitomo Mitsui Asset Management
Company, Limited

Promise Co., Ltd.

At–Loan Co., Ltd.

Sanyo Shinpan Finance Co., Ltd.

POCKETCARD Co., LTD.

Central Finance Co., Ltd.

OMC Card, Inc.

Sumitomo Mitsui Auto Service
Company, Limited

Issued Capital
(Millions of Yen)

Percentage of
SMFG’s Voting
Rights (%)

Percentage of
SMBC’s Voting
Rights (%)

Established

Main Business

255,700

—

Feb. 5, 1999

Securities

18,767

2,000

(100)

(40)

Oct. 20, 1983

Venture capital

—

Sept. 4, 2001

Investments

April 1, 1999

Investment advisory and investment trust
management

Sept. 21, 2000

Investment management, investment
advisory, and agency services

(30)

(17.50)

17.50

Dec. 1, 2002

Investment management, investment
advisory, and agency services

(22.02)

22.02

Mar. 20, 1962

Consumer loans

(100)

49.99

(50.00)

June 8, 2000

Consumer loans

(100)

Nov. 22, 1946

Consumer loans

(47.02)

4.99

(42.02)

May 25, 1982

Credit card services

1,600

2,000

80,737

10,912

16,268

11,268

23,254

9.41

(15.35)

43,343

(32.61)

15.33

32.61

Jan. 28, 1960

Credit card services

Sept. 11, 1950

Credit card services

6,950

39.99

—

Feb. 21, 1981

Leasing

* On April 1, 2008, Sumitomo Mitsui Banking Corporation included Japan Pension Navigator Co., Ltd., within the scope of consolidation.

206

SMFG 2008

International Directory (as of June 30, 2008)

Asia and Oceania

SMBC

Branches, Sub-Branches and
Representative Offices

Beijing Branch
16th Floor, North Tower, Beijing
Kerry Center No. 1, Guanghua
Road, Chaoyang District, Beijing,
The People’s Republic of China
Tel: 86 (10) 5920-4500
Fax: 86 (10) 5915-1080

Hong Kong Branch
7th and 8th Floor, One International
Finance Centre, 1 Harbour View
Street, Central, Hong Kong
Special Administrative Region,
The People’s Republic of China
Tel: 852-2206-2000
Fax: 852-2206-2888

Shanghai Branch
11th Floor, Shanghai World
Financial Center, 100 Century
Avenue, Pudong New Area,
Shanghai,
The People’s Republic of China
Tel: 86 (21) 3860-9000
Fax: 86 (21) 3860-9999

Tianjin Branch
12th Floor, The Exchange Tower 2,
189 Nanjing Road, Heping District,
Tianjin 300051,
The People’s Republic of China
Tel: 86 (22) 2330-6677
Fax: 86 (22) 2319-2111

Tianjin Binhai Sub-Branch
8F, E2B, Binhai Financial Street,
No. 20, Guangchang East Road,
TEDA, Tianjin, The People’s
Republic of China
Tel: 86 (22) 6622-6677
Fax: 86 (22) 6628-1333

Guangzhou Branch
12th Floor, International Finance
Place, No. 8 Huaxia Road, Tianhe
District, Guangzhou 510623,
The People’s Republic of China
Tel: 86 (20) 3819-1888
Fax: 86 (20) 3810-2028

Suzhou Branch
23F, Metropolitan Towers,
No.199 Shi Shan Road,
Suzhou New District,
Suzhou, Jiangsu, 215011
The People’s Republic of China
Tel: 86 (512) 6825-8205
Fax: 86 (512) 6825-6121

Suzhou Industrial Park Sub-
Branch
16F, International Building, No. 2,
Suhua Road, Suzhou Industrial
Park, Jiangsu, The People’s
Republic of China
Tel: 86 (512) 6288-5018
Fax: 86 (512) 6288-5028

Hangzhou Branch
23F, Golden Plaza, No. 118,
Qing Chun Road, Xia Cheng
District, Hangzhou, Zhejiang 310006
The People’s Republic of China
Tel: 86 (571) 2889-1111
Fax: 86 (571) 2889-6699

Beijing Representative Office*
2902, Jing Guang Centre, Hujialou,
Chaoyang District, Beijing, 100020
The People’s Republic of China
Tel: 86 (10) 6597-3351
Fax: 86 (10) 6597-3002

Dalian Representative Office
Senmao Building 9F, 147
Zhongshan Lu, Dalian,
Liaoning 116011
The People’s Republic of China
Tel: 86 (411) 8370-7873
Fax: 86 (411) 8370-7761

Chongqing Representative Office
5F, Holiday Inn Yangtze Chongqing,
15 Nan Ping Bei Lu,
Chongqing, 400060
The People’s Republic of China
Tel: 86 (23) 6280-3394
Fax: 86 (23) 6280-3748

Shenyang Representative Office
Room No. 606, Gloria Plaza Hotel
Shenyang, No. 32 Yingbin Street,
Shenhe District, Shenyang,
Liaoning 110013
The People’s Republic of China
Tel: 86 (24) 2252-8310
Fax: 86 (24) 2252-8769

Taipei Branch
Aurora International Building 9F,
No. 2, Hsin Yi Rd. Sec. 5,
Taipei, 110 Taiwan
Tel: 886 (2) 2720-8100
Fax: 886 (2) 2720-8287

Seoul Branch
Young Poong Bldg. 7F,
33, Seorin-dong, Jongno-gu,
Seoul, 110-752, Korea
Tel: 82 (2) 732-1801
Fax: 82 (2) 399-6330

* Procedures are under way to close the Beijing Representative Office.

SMFG 2008 207

Singapore Branch
3 Temasek Avenue, #06-01,
Centennial Tower,
Singapore 039190,
The Republic of Singapore
Tel: 65-6882-0000/0001
Fax: 65-6887-0220/0330

Labuan Branch
Level 12 (B&C), Main Office Tower,
Financial Park Labuan, Jalan
Merdeka, 87000 Labuan,
Federal Territory, Malaysia
Tel: 60 (87) 410955
Fax: 60 (87) 410959

Labuan Branch Kuala Lumpur
Marketing Office
Letter Box No. 25, 29th Floor,
UBN Tower, 10, Jalan P. Ramlee,
50250 Kuala Lumpur, Malaysia
Tel: 60 (3) 2026-8392
Fax: 60 (3) 2026-8395

Kuala Lumpur Representative
Office
Letter Box No. 25, 29th Floor,
UBN Tower, 10, Jalan P. Ramlee,
50250 Kuala Lumpur, Malaysia
Tel: 60 (3) 2026-8392
Fax: 60 (3) 2026-8395

Hanoi Representative Office
Suite 1001, 10th Floor, Hanoi
Central Office Building, 44B Ly
Thuong Kiet Street, Hanoi, Vietnam
Tel: 84 (4) 936-3830
Fax: 84 (4) 936-3831

Ho Chi Minh City Branch
9th Floor, The Landmark,
5B Ton Duc Thang Street, District 1,
Ho Chi Minh City, Vietnam
Tel: 84 (8) 520-2525
Fax: 84 (8) 822-7762

Yangon Representative Office
Room No. 717/718, Traders Hotel,
223 Sule Pagoda Road,
Pabedan Township,
Yangon, Myanmar
Tel: 95 (1) 242828 ext.7717
Fax: 95 (1) 381227

Bangkok Branch
8th-10th Floor, Q.House
Lumpini Building, 1 South
Sathorn Road, Tungmahamek,
Sathorn, Bangkok 10120 Thailand
Tel: 66 (2) 353-8000
Fax: 66 (2) 353-8282

Manila Representative Office
20th Floor, Rufino Pacific Tower,
6784 Ayala Avenue, Makati City,
Metro Manila, The Philippines
Tel: 63 (2) 841-0098/9
Fax: 63 (2) 811-0877

Sydney Branch
Level 35, The Chifley Tower, 2
Chifley Square, Sydney,
NSW 2000, Australia
Tel: 61 (2) 9376-1800
Fax: 61 (2) 9376-1863

SMBC Principal Subsidiaries/
Affiliates
SMFG Network

Sumitomo Mitsui Finance
Australia Limited
Level 35, The Chifley Tower, 2
Chifley Square, Sydney,
NSW 2000, Australia
Tel: 61 (2) 9376-1800
Fax: 61 (2) 9376-1863

PT Bank Sumitomo Mitsui
Indonesia
Summitmas II, 10th Floor,
JI. Jendral Sudirman Kav. 61-62,
Jakarta 12190, Indonesia
Tel: 62 (21) 522-7011
Fax: 62 (21) 522-7022

SMBC Metro Investment
Corpration
20th Floor, Rufino Pacific Tower,
6784 Ayala Avenue, Makati City,
Metro Manila, The Philippines
Tel: 63 (2) 811-0845
Fax: 63 (2) 811-0876

BSL Leasing Co., Ltd.
19th Fl. Sathorn City Tower,
175 South Sathorn Road,
Bangkok, Thailand
Tel: 66 (2) 670-4700
Fax: 66 (2) 679-6160

208

SMFG 2008

Sumitomo Mitsui Finance and
Leasing (China) Co., Ltd.
Room 2502-2503, Goldlion Tower,
138, Ti Yu Dong Road,
Guangzhou, 510620
The People’s Republic of China
Tel: 86 (20) 8755-0021
Fax: 86 (20) 8755-0422

SMFL Leasing (Malaysia) Sdn. Bhd.
Letter Box No. 58, 11th Floor,
UBN Tower, 10, Jalan P. Ramlee,
50250 Kuala Lumpur, Malaysia
Tel: 60 (3) 2026-2619
Fax: 60 (3) 2026-2627

Sumitomo Mitsui Auto Leasing
& Service (Thailand) Co., Ltd.
161, Nuntawan Building, 10th Floor,
Rajdamri Road,
Khwaeng Lumpinee,
Khet Pathumwan,
Bangkok Metropolis, Thailand
Tel: 66 2252-9511
Fax: 66 2255-3130

SBCS Co., Ltd.
10th Floor, Q.House Lumpini
Building, 1 South Sathorn Road,
Tungmahamek, Sathorn,
Bangkok 10120 Thailand
Tel: 66 (2) 677-7270~5
Fax: 66 (2) 677-7279

SMBC Capital Markets Limited
Hong Kong Branch
7th Floor, One International Finance
Centre, 1 Harbour View Street,
Central, Hong Kong
Special Administrative Region,
The People’s Republic of China
Tel: 852-2532-8500
Fax: 852-2532-8505

SMBC Capital India Private Limited
B-14/A, Qutab Institutional Area,
Katwaria Sarai,
New Delhi-1100016 India
Tel: 91 (11) 4607-8366
Fax: 91 (11) 4607-8355

The Japan Research Institute
(Shanghai) Solution Co., Ltd.
15F, Shanghai World
Financial Center,
100 Century Avenue,
Pudong New Area,
Shanghai, 200120 The People’s
Republic of China
Tel: 86 (21) 5054-1688
Fax: 86 (21) 5054-6122

The Japan Research Institute
(Shanghai) Consulting Co., Ltd.
15F, Shanghai World
Financial Center,
100 Century Avenue,
Pudong New Area,
Shanghai, 200120 The People’s
Republic of China
Tel: 86 (21) 5044-1677
Fax: 86 (21) 5054-6122

Sumitomo Mitsui Finance and
Leasing (Singapore) Pte. Ltd.
152 Beach Road,
Gateway East #21-5,
Singapore 189721
Tel: 65-6224-2955
Fax: 65-6225-3570

Sumitomo Mitsui Finance and
Leasing (Hong Kong) Ltd.
Room 2703, Tower I,
Admiralty Centre, 18 Harcourt
Road, Hong Kong Special
Administrative Region,
The People’s Republic of China
Tel: 852-2523-4155
Fax: 852-2845-9246

SMFL Leasing (Thailand) Co., Ltd.
30th Floor, Q. House
Lumpini Building,
1 South Sathorn Road,
Tungmahamek, Sathorn,
Bangkok 10120, Thailand
Tel: 66 (2) 677-7400
Fax: 66 (2) 677-7413

SMFG 2008 209

Sumitomo Finance (Asia) Limited
P.O. Box 694, Edward Street,
George Town, Grand Cayman,
Cayman Islands

JRI America, Inc.
277 Park Avenue, New York,
NY 10172, U.S.A.
Tel: 1 (212) 224-4200
Fax: 1 (212) 224-4611

Americas

SMBC

Branches and Representative
Offices

New York Branch
277 Park Avenue, New York,
NY 10172, U.S.A.
Tel: 1 (212) 224-4000
Fax: 1 (212) 593-9522

Cayman Branch
P.O. Box 694, Edward Street,
George Town, Grand Cayman,
Cayman Islands

Los Angeles Branch
601 South Figueroa Street
Suite 1800, Los Angeles,
CA 90017, U.S.A.
Tel: 1 (213) 452-7800
Fax: 1 (213) 623-6832

San Francisco Branch
555 California Street, Suite 3350,
San Francisco, CA 94104, U.S.A.
Tel: 1 (415) 616-3000
Fax: 1 (415) 397-1475

Houston Representative Office
Two Allen Center, 1200 Smith Street,
Suite 1140 Houston, TX 77002,
U.S.A.
Tel: 1 (713) 277-3500
Fax: 1 (713) 277-3555

SMBC Principal Subsidiaries
SMFG Network

Manufacturers Bank
515 South Figueroa Street,
Los Angeles, CA 90071, U.S.A.
Tel: 1 (213) 489-6200
Fax: 1 (213) 489-6254

Sumitomo Mitsui Banking
Corporation of Canada
Ernst & Young Tower, Toronto
Dominion Centre, Suite 1400,
P.O. Box 172, 222 Bay Street,
Toronto, Ontario M5K 1H6, Canada
Tel: 1 (416) 368-4766
Fax: 1 (416) 367-3565

Banco Sumitomo Mitsui Brasileiro S.A.
Avenida Paulista, 37,
São Paulo, Brazil
Tel: 55 (11) 3178-8000
Fax: 55 (11) 3289-1668

SMBC Capital Markets, Inc.
277 Park Avenue, New York,
NY 10172, U.S.A.
Tel: 1 (212) 224-5100
Fax: 1 (212) 224-5181

SMBC Leasing and Finance, Inc.
277 Park Avenue, New York,
NY 10172, U.S.A.
Tel: 1 (212) 224-5200
Fax: 1 (212) 224-5222

SMBC Securities, Inc.
277 Park Avenue, New York,
NY 10172, U.S.A.
Tel: 1 (212) 224-5300
Fax: 1 (212) 224-5333

SFVI Limited
P.O. Box 961,
30 De Castro Street,
Road Town, Tortola,
British Virgin Islands

210

SMFG 2008

Europe, Middle-East and Africa

SMBC

Branches and Representative
Offices

Düsseldorf Branch
Prinzenallee 7, 40549 Düsseldorf,
Federal Republic of Germany
Tel: 49 (211) 36190
Fax: 49 (211) 3619236

Brussels Branch
Avenue des Arts, 58, Bte. 18,
1000 Brussels, Belgium
Tel: 32 (2) 551-5000
Fax: 32 (2) 513-4100

Dubai Branch
Building One, 5th Floor, Gate
Precinct, Dubai International
Financial Centre, P.O. Box 506559
Dubai, United Arab Emirates
Tel: 971 (4) 428-8000
Fax: 971 (4) 428-8001

SMBC Amsterdam Representative
Office
Strawinskylaan 1733 Toren D-12,
1077XX Amsterdam,
The Netherlands
Tel: 31 (20) 718-3888
Fax: 31 (20) 718-3889

Prague Representative Office
International Business Centre,
Pobrezni 3 186 00, Prague 8,
Czech Republic
Tel: 420-224-832-911
Tel: 420-224-832-933

Madrid Representative Office
Serrano 16, 28001 Madrid, Spain
Tel: 34 (91) 576-6196
Fax: 34 (91) 577-7525

Doha QFC Office
Unit 1504, The Ministry of Economy
and Commerce Building,
P.O. Box 23769, Doha, Qatar
Tel: 974-496-7572
Tel: 974-496-7576

Bahrain Representative Office
No. 406 & 407 (Entrance 3, 4th Floor)
Manama Centre, Government Road,
Manama, State of Bahrain
Tel: 973-1722-3211
Fax: 973-1722-4424

Tehran Representative Office
4th Floor, 80 Nezami Gangavi
Street, Vali-e-Asr Avenue, Tehran
14348, Islamic Republic of Iran
Tel: 98 (21) 8879-4586
Fax: 98 (21) 8820-6523

Cairo Representative Office
Flat No. 6, 14th Fl., 3 Ibn
Kasir Street, Cornish El Nile,
Giza, Arab Republic of Egypt
Tel: 20 (2) 3761-7657
Fax: 20 (2) 3761-7658

Johannesburg Representative
Office
Building Four, First Floor,
Commerce Square, 39 Rivona Road,
Sadhurst, Sandton, Republic of
South Africa
Tel: 27 (11) 502-1780
Fax: 27 (11) 502-1790

SMBC Principal Subsidiaries
SMFG Network

Sumitomo Mitsui Banking
Corporation Europe Limited
99 Queen Victoria Street, London
EC4V 4EH, U.K.
Tel: 44 (20) 7786-1000
Fax: 44 (20) 7236-0049

SMBC Capital Markets Limited
99 Queen Victoria Street, London
EC4V 4EH, U.K.
Tel: 44 (20) 7786-1400
Fax: 44 (20) 7786-1490

SMBC Derivative Products Limited
99 Queen Victoria Street, London
EC4V 4EH, U.K.
Tel: 44 (20) 7786-1400
Fax: 44 (20) 7786-1490

Sumitomo Mitsui Banking
Corporation Europe Limited
Paris Branch
20, Rue de la Ville l’Evêque,
75008 Paris, France
Tel: 33 (1) 44 (71) 40-00
Fax: 33 (1) 44 (71) 40-50

Sumitomo Mitsui Banking
Corporation Europe Limited
Milan Branch
Via della Spiga 30/ Via Senato 25,
20121 Milan, Italy
Tel: 39 (027) 636-1700
Fax: 39 (027) 636-1701

Sumitomo Mitsui Banking
Corporation Europe Limited
Moscow Representative Office
Room No. 305, Building 5,
Ilyinka St. 3/8 Moscow, 109012
Russian Federation
Tel: 7 (495) 789-3973
Fax: 7 (495) 789-3975

Sumitomo Mitsui Finance
Dublin Limited
La Touche House, International
Financial Services Centre, Custom
House Docks, Dublin 1, Ireland
Tel: 353 (1) 670-0066
Fax: 353 (1) 670-0353

JRI Europe, Limited
99 Queen Victoria Street, London
EC4V 4EH, U.K.
Tel: 44 (20) 7406-2700
Fax: 44 (20) 7406-2799

SMFG 2008 211

**SMBCE=Sumitomo Mitsui Banking Corporation Europe Limited

Sumitomo Mitsui Finance Dublin Limited

SMBCE** Moscow Representative Office

Sumitomo Mitsui Banking
Corporation Europe Limited

Amsterdam Representative Office

Brussels Branch

Prague Representative Office

SMBC Capital Markets Limited

Düsseldorf Branch

SMBCE** Paris Branch

SMBCE** Milan Branch

Madrid Representative Office

Cairo Representative Office

Tehran Representative Office

Bahrain Representative Office

Dubai Branch

Doha Representative Office

Yang

Johannesburg Representative Office

GLOBAL NETWORK

Sumitomo Mitsui Finance Australia Limited

Sydney Branch

Asia and Oceania

■ Beijing Branch
■ Shanghai Branch
■ Tianjin Branch
■ Tianjin Binhai Sub-Branch
■ Guangzhou Branch
■ Suzhou Branch
■ Suzhou Industrial Park Sub-Branch
■ Hangzhou Branch
■ Dalian Representative Office
■ Chongqing Representative Office

212

SMFG 2008

■ Shenyang Representative Office
■ Beijing Representative Office***
■ Hong Kong Branch

SMBC Capital Markets Limited Hong Kong Branch

■ Taipei Branch
■ Seoul Branch
■ Singapore Branch
■ Labuan Branch
■ Labuan Branch Kuala Lumpur Marketing Office

Kuala Lumpur Representative Office

■ Ho Chi Minh City Branch
■ Hanoi Representative Office
■ Yangon Representative Office
■ Bangkok Branch
■ Manila Representative Office
■ Sydney Branch

Sumitomo Mitsui Finance Australia Limited

■ PT Bank Sumitomo Mitsui Indonesia

*** Procedures are under way to close the Beijing Representative Office.

Overseas service network (as of June 30, 2008)
Branches*: 19 Sub-Branches*: 6
Representative Offices*: 16 Total: 41
Also showing principal overseas subsidiaries
* Number of each status is based on the definition in Japan

Los Angeles Branch

San Francisco Branch

Shenyang Representative Office
Beijing Branch

Beijing Representative Office

Tianjin Binhai Sub-Branch

Dalian Representative Office

Tianjin Branch

Suzhou Industrial Park Sub-Branch

Seoul Branch

Suzhou Branch

Shanghai Branch

Manufacturers Bank

Sumitomo Mitsui Banking Corporation of Canada

New York Branch
SMBC Capital Markets, Inc.
SMBC Leasing and Finance, Inc.

Houston Representative Office

Cayman Branch

Chongqing Representative Office

Hangzhou Branch

Hanoi Representative Office

Guangzhou Branch

Taipei Branch

Yangon Representative Office

Hong Kong Branch
SMBC Capital Markets Limited Hong Kong Branch

Bangkok Branch

Manila Representative Office

Labuan Branch Kuala Lumpur
Marketing Office
Kuala Lumpur Representative Office

Ho Chi Minh City Branch

Labuan Branch

Singapore Branch

PT Bank Sumitomo Mitsui Indonesia

Banco Sumitomo Mitsui Brasileiro S.A.

The Americas

■ New York Branch

SMBC Capital Markets, Inc.
SMBC Leasing and Finance, Inc.

■ Los Angeles Branch*
■ San Francisco Branch*
■ Houston Representative Office*

■ Cayman Branch
■ Manufacturers Bank
■ Sumitomo Mitsui Banking
Corporation of Canada

■ Banco Sumitomo Mitsui Brasileiro S.A.

Europe, Middle East and Africa

■ Sumitomo Mitsui Banking

Corporation Europe Limited
SMBC Capital Markets Limited

■ Sumitomo Mitsui Banking Corporation

Europe Limited Paris Branch

■ Sumitomo Mitsui Banking Corporation

Europe Limited Milan Branch

■ Düsseldorf Branch
■ Brussels Branch
■ SMBC Amsterdam Representative Office
■ Madrid Representative Office

■ Prague Representative Office
■ Sumitomo Mitsui Banking Corporation
Europe Limited Moscow Representative
Office

■ Sumitomo Mitsui Finance Dublin Limited
■ Dubai Branch
■ Doha QFC Office
■ Bahrain Representative Office
■ Tehran Representative Office
■ Cairo Representative Office
■ Johannesburg Representative Office

SMFG 2008 213

ANNUAL REPORT

2008

YEAR ENDED MARCH 31, 2008

www.smfg.co.jp/english

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